Blair v. Rutherford

• Decision Date: 31 October 1868
• Citation: 31 Tex. 465
• Parties: WILLIAM A. BLAIR v. ROBERT A. RUTHERFORD.
• Court: Texas Supreme Court

31 Tex. 465

WILLIAM A. BLAIR

v.ROBERT A. RUTHERFORD.

Supreme Court of Texas.

October, 1868.

R. executed his notes to G., president of the board of commissioners of the Air-Line railroad, due at one and two years. Before they matured the president of the same company indorsed these notes to C. and W., who indorsed them to B., the plaintiff: Held, that as indorsee and holder of this negotiable paper before maturity, the plaintiff was not charged with any possible defense which R., the maker, might have against the corporation. Pas. Dig. art. 222, note 285.

There was a clause in the charter which read as follows: “They (the commissioners) shall receive no subscriptions to said stock unless five per cent. thereof in cash shall be paid to them at the time of subscribing, and should they receive subscriptions to said stock without payment, they shall be personally liable to pay the same to said corporation when organized.” The fact that the commissioners did not exact the five per centum from the subscribers affords no defense to a stockholder who gave the note in suit for stock. The clause was not a condition precedent to the organization of the company, but a mere personal liability or penalty imposed on the commissioners if they should fail to collect the five per centum. This presupposes the existence of a corporation before the five per cent. is collected.

There was a discretion left to the commissioners as to how the liability of subscribers should be fixed.

The members of the corporation could not complain of its own neglect or wrongful or fraudulent acts. Where all the facts were in the pleadings as well as in the statement of facts, and the jury found for the defendant because of an erroneous instruction, the court reversed and reformed, and rendered judgment for plaintiff. Pas. Dig. art. 1562, note 604.

ERROR from Travis. The case was tried before Hon. JOHN IRELAND, one of the district judges.

On the 30th January, 1860, the legislature incorporated the “Air-Line Railroad Company,” for constructing a railroad from Brenham to Austin, Texas. The act provided for a board of commissioners to procure stock subscriptions. These commissioners elected George W. Glasscock their president. The defendant, Rutherford, became one of the subscribers for stock, and in payment therefor he executed his several notes of the tenor set out in the opinion. The railroad company having been organized, the railroad transferred these notes, payable to Glasscock, to Catterton & Williams, who indorsed them to the plaintiff, Blair. Catterton & Williams were contractors employed by the Air-Line railroad to grade five miles of the road. The work was proceeding, when the experiment of secession was tried; war followed. The time for all operations by railroad companies was extended. Pas. Dig. arts. 4960-4968. After the close of the war the charter of this company was extended. Rutherford refused to pay his notes, and in his defense treated the holder of them as he would the original payees, and seemed to hold him liable for all the failures to build the Air-Line railroad.

All the pleadings of the parties seemed to be founded upon the notion that it was necessary for the plaintiff to prove good faith and compliance on the part of the Air-Line Railroad Company.

After a great number of amended petitions the case was dismissed on exceptions. The plaintiff prosecuted error.

Hancock & West and Chandler & Turner, for the plaintiff in error. The exceptions really were: I. That the law creating the charter of the Air-Line Railroad Company required that $300,000 stock should be subscribed and five per cent. paid in before they could organize the company; that, inasmuch as the five per cent. was not all paid in before the organization, the organization was void, and every act of the president and directors and other officers was void; consequently the object for which the notes sued on were given had failed, and the notes were void for want of consideration.

II. That the notes sued on were made payable to George W. Glasscock, president of the board of commissioners of the Air-Line Railroad Company, when there was no company or corporation when the notes were executed, because the company had not been organized, and that Glasscock was a commissioner of the state, and not of a corporation, which then had no existence. President, managers and company of the Centre and Kishacoquillas Turnpike Road Company v. McConaby, 16 Serg. & R. 140;Vermont Central Railroad Company v. George Clayes, 21 Vt. 30;Duke v. The Cahawba Navigation Company, 16 Ala. 374; Red. Railways, p. 10, sec. 9; Thomas Jenkins v. Union Turnpike Company, 1 Caines, Cas. 86; 21 Vt. 35;Clark v. Magnolia Navigation Company, 10 Watts, 364;Moran et al. v. The Commissioners of Miami County, 2 Black, 722;16 N. Y. 129;14 Johns. 244;Willmarth v. Crawford, 10 Wend. 344;Watson v. A. Flanagan, 14 Tex. 354;Hopkins v. Upshur, 20 Tex. 89; City of San Antonio v. Jones, decided by this court at the fall term, 1866 (28 Tex. 478);Chester Glass Company v. Dewey, 16 Mass. 94;Vermont Central Railroad v. Clayes, 21 Vt. 35;20 Ill. 654;10 Ohio, 114; Angell & Ames, Corp. sec. 94; 4 Den. 396.

T. D. Moseley, for the defendant in error.

CALDWELL, J.

This suit was commenced by the plaintiff in error in the district court of Travis county upon two promissory notes, in all respects similar except as to time of payment.

They read as follows:

+-------------------------------+
                ¦“$190.¦AUSTIN, May   12, 1860. ¦
                +-------------------------------+
                

On the first day of June, A. D. 1861, I promise to pay to the order of George W. Glasscock, president of the board of commissioners of the Air-Line Railroad Company, $190, with interest from the 1st day of June next, for value received, payable at the office of said company.

R. A. RUTHERFORD.

Each of said notes is thus indorsed:

March 16, 1861. Pay to the order of Catterton & Williams, without recourse of any kind.

The Air-Line Railroad Company.

By J. B. BANKS, President.”

“Pay to W. A. Blair.

CATTERTON & WILLIAMS.

+----------------------------------+
                ¦Without recourse.¦G. W. GLASSCOCK,¦
                +----------------------------------+
                

Pres't Board Com. Air-Line R. R. Com.”

The pleadings are voluminous, and counsel seem to have explored every source from which information could be drawn touching suits by and against corporations; but with our view of the law, under favor we would say it, their labors have not been of a...