Heaston v. The Cincinnati and Fort Wayne Railroad Co.

• Decision Date: 06 June 1861
• Parties: Heaston v. The Cincinnati and Fort Wayne Railroad Company
• Court: Indiana Supreme Court

16 Ind. 275

Heaston v. The Cincinnati and Fort Wayne Railroad Company

Supreme Court of Indiana

June 6, 1861

APPEAL from the Randolph Circuit Court.

The judgment is reversed, with costs. Cause remanded.

J Smith and M. Way, for the appellant.

O. P Morton and W. A. Peele, for the appellee.

OPINION

Perkins J.

The Cincinnati and Fort Wayne Railroad Co. sued David Heaston, on an alleged subscription to the capital stock of said company, of $ 1,500. His subscription appears to the original articles of organization, and a copy of them is filed as the foundation of the action. The defendant answered in sixteen paragraphs. To a part of those paragraphs the plaintiff demurred; the Court sustained the demurrer, the defendant excepted, and the cause was continued. At a subsequent term, the Court permitted those demurrers to be withdrawn, and others to be filed, argued and decided upon. The appellant contends, that when "a bill of exceptions is sealed, the truth of the facts contained in it can not afterward be disputed. 2 Tidd's Prac. 864. Both parties are concluded by it, and the adverse party can not afterward aver the contrary, or even supply an omission in it. 1 Arch. Pr. 210. Hence, he can not have it changed. Our statute allows such an exception as this to be placed on the record; it, however, stands there as if it were in a bill of exceptions. The bill is no part of the record in the Court below, (2 Tidd's Pr. 865,) and of course it could not be altered by the Court below, on the ground of its right to amend its record."

It is true that the Court can not legally alter the record of its proceedings after the term, and that a bill of exceptions can not be altered. See 15 Ind. 73. Nevertheless, it is undoubtedly proper that before a cause is tried, material issues, calculated to settle the merits of the pending controversy, should be formed, and Courts should possess power, up to that point, of correcting errors that may have occurred in their proceedings. Hence, the power of permitting amendments, of filing additional pleadings, &c. The successive acts may all properly appear of record, but the later may correct the errors in the earlier. In this case, if, instead of permitting the former demurrers to be withdrawn and new ones filed, the Court had permitted the paragraphs of the answer to be re-filed, and new demurrers to them, covering the ground of the former and curing defects, it could not have been held erroneous. It does not appear that the mode of reaching the result arrived at below, injured the defendant; and if not, the cause should not be reversed on his application, on account of an error that worked no injury to the merits of the defense.

The Court, on motion, struck out six paragraphs of the answer. Those paragraphs denied the existence of the corporation, assigning, in the different paragraphs, reasons why the plaintiff was not such; as, that the articles of organization were filed before the law was in force, &c. The paragraphs would have been bad on demurrer; a right result was reached. The Court judicially knew that the general railroad law was in force at the time the corporation was formed. The State ex rel., &c. v. Bailey et al., ante, p.

A corporation may sue, in this State, in its corporate name, and need not aver in the complaint how it became a corporation, nor that it is such. And a default, or answer in denial of the cause of action, admits the capacity of the plaintiff to sue. Harris v. The Muskingum, &c. Co., 4 Blackf. 267, and cases cited. Hubbard v. Chappel, 14 Ind. 601.

But there may be an answer of nul tiel corporation, at the commencement of the suit. The cases supra; and Morgan v. Lawrenceburgh, &c., 3 Ind. 285; Ind. Dig., p. 318. Such answer, it is now settled in this State, is an answer in abatement, and must therefore precede answers to the merits. Jones v. The Cincinnati, &c. Co., 14 Ind. 89; McIntyre v. Preston, 5 Gill. (Ill.) 48; Phenix Bank, &c. v. Curtis, 14 Conn. 437. And upon the trial of an issue of fact on such answer, or on a reply thereto, the proof is limited to the question of the existence, de facto, of a corporation, under an authority sanctioning such a corporation, de jure. In other words, mere irregularities in organization can not be shown collaterally, where there is no defect of power. The Bank of Toledo v. The International Bank, 21 N. Y. (Court of Appeals,) 542; and the authorities supra. See the cases cited in Abb. Pl. (N. Y.) p. 179; also Ewing v. Robeson et al., 15 Ind. 26. And where such answer denies the existence, at the commencement of the suit, of a corporation which is shown to have once existed, the answer should particularly set forth the manner in which the corporate powers ceased. Ind. Dig., § 63, p. 319. A faulty answer in this respect was erroneously held good in Morgan v. Lawrenceburg, &c., 3 Ind., supra.

We have asserted above, that the issue of nul tiel corporation is upon the existence of a de facto corporation, where one de jure is authorized; and upon this fact rests the doctrine of estoppel to deny the existence of a corporation, in certain cases. The estoppel goes to the mere de facto organization, not to the question of legal authority to make an organization. A de facto corporation, that by regularity of organization might be one de jure, can sue and be sued. And a person who contracts with such corporation, while it is acting under its de facto organization, who contracts with it as an organized corporation, is estopped, in a suit on such contract, to deny its de facto organization at the date of the contract; but this does not extend to the question of legal power to organize. Hence, if an organization is completed where there is no law, or an unconstitutional law, authorizing an organization as a corporation, the doctrine of estoppel does not apply. Harriman v. Southam, ante, p. 190; Brown et al. v. Killian, 11 Ind. 449. See 15 id. 395. So, if the plaintiff suing in a name importing, prima facie, a corporation, in fact is not assuming to act as a corporation, but only as a partnership, this fact may be raised by an answer alleging want of parties in interest to the suit. Farnsworth v. Drake, 11 Ind. 101. See Brown et al. v. Killian, supra. The sixteenth paragraph of the answer averred the non-performance of a condition precedent by the corporation, it having failed to tender to the defendant a certificate of stock. The paragraph was bad. The New Albany, Co. v. McCormick, 10 Ind. 499.

It is alleged that a challenge to a juror was wrongly sustained; but judgment will not be reversed, because the Court sustained a challenge to a juror, for cause which did not render him legally incompetent, where the act was done in an effort to get a perfectly impartial jury, and such result was achieved. Carpenter v. Dame, 10 Ind. 125.

The board of directors of the company, on June 21, 1853 passed and entered on its records the following resolution:

"Resolved, That the stockholders in the Cincinnati and Fort Wayne Railroad Company are hereby required to pay an installment of 10 per cent. every thirty days, on all cash subscriptions, until the whole subscriptions are paid; and that due notice thereof be given, signed by the president and secretary." It was offered in evidence, on the trial, and objected to by the appellant for the following reasons, stated at the time:

1. That it was too vague, indefinite, and uncertain to bind the defendant.

2. That it did not fix a time when payment of the installments of stock should commence, nor did it fix a definite time when any installment should be paid.

3. That it required the installments of stock to be paid in installments of 10 per cent. every thirty days.

The Court overruled the objections and let the resolution be read to the jury. We think the resolution was admissible, to show a call for payment of an installment in thirty days from date, and every thirty days afterward. The appellee claims to be incorporated under the general railroad law of May 11, 1852, the 8th section of which, 1 R. S., p. 412, provides that the directors may call in and demand from the stockholders, any sums of money by them subscribed, in such payments or installments as the directors shall deem proper; under penalty of forfeiture of the stock subscribed, if payment be not made by the stockholder "within thirty days after personal demand, or notice requiring such payment, shall have been made in each county through which such road shall be laid out, in which a newspaper shall be published: Provided, that subscriptions shall not be required to be paid, except in equal installments of not more than 10 per cent. a month."

It is contended that the word month, here, must be taken to mean calendar month, under the rule prescribed by the code, 2 R S., p. 339, (Ind. Dig., p. 748) which is that the word month shall mean calendar month, unless otherwise...