May v. The Memphis Branch R.R. Co.

• Decision Date: 31 January 1873
• Citation: 48 Ga. 110
• Parties: Samuel M. May, plaintiff in error. vs. The Memphis Branch Railroad Company, defendant in error.
• Court: Georgia Supreme Court

48 Ga. 110

Samuel M. May, plaintiff in error. vs. The Memphis Branch Railroad Company, defendant in error.

Supreme Court of the State of Georgia

(Atlanta, January Term, 1873.)

*Railroads. Charter. Stockholders. Waiver. Before Judge Harvey. Floyd Superior Court. July Adjourned Term, 1872.

For the facts of this case, see the decision.

W. B. Terhune; Printup & Fouche; Wright & Featherston, for plaintiff in error.

Smith & Branham; Underwood & Rowell; Dunlap Scott, for defendant.

Trippe, Judge.

The Memphis Branch Railroad Company brought suit against S. M. May for three installments of $100 00, which had been assessed on his subscription to the capital stock of the company. The defendant, amongst other defenses, pleaded:

1. That when his subscription was made, the charter of the company, approved October 10th, 1868, declared that the capital stock of said company shall be $500,000 00, in shares of $100 00 each, and that since his subscription was made, the company had procured the passage of an Act, approved December 4th, 1871, amending the charter, which was injurious to him, to-wit: an amendment authorizing said company to commence work on said road whenever $100,000 00 shall have been subscribed.

2. That, after he had made his subscription, Alfred Shorter subscribed for $250,000 00 of said stock. That, at a called meeting of the stockholders, on March 20th, 1871, it was consented that the said Shorter might surrender said stock to the company, on the ground that the subscription was understood to be only nominal when made, and was made for the protection and benefit of the company, and that he was, at an annual meeting of the stockholders on the 1st September, 1871, allowed to make a relinquishment of said stock to the company, and that the release of Shorter was a release of defendant.

3. That said company had never been legally organized, *because the law requires that the annual meeting of the stockholders to elect a board of directors shall be held on the first Monday in May in each year, which was not done, the first board being elected on the 25th May, 1869, the second on the 21st May, 1870, the third on 1st September, 1871, the fourth on 6th May, 1872.

4. That the board of directors had commenced the construction of said road on a capital of $150,000 00, which amount was insufficient to build it to a point that would make it profitable to the stockholders.

5. That when he subscribed, it was understood and believed that said road, when constructed, was to be the broad or common gauge, whereas, the board of directors are proceeding to construct a narrow gauge road.

The suit was instituted in the Justice's Court, in October, 1872, and, by consent, appealed to the Superior Court and tried in November, 1872. The whole question of fact and law was, by agreement of the parties, submitted to the Judge, and judgment rendered in favor of the company for the amount of the assessment. Error is assigned on the ground that the Court overruled and gave judgment against each of said pleas.

The record shows that the facts recited in the pleas were true, with the modifications hereafter stated; also, that the first installment was assessed, and was due June 15th, 1870; that defendant had paid three installments of five per cent. each; that the twenty-five hundred shares subscribed by Shorter, and from which he was released, were subscribed "long after defendant had subscribed and paid a part of his installments;" that, besides Shorter's subscription, a little less than $150,000 of stock has been taken; that the company commenced the prosecution of their enterprise on the 15th of June, 1870; that a bridge, costing $15,000 00, has been built; that between $40,000 00 and $50,000 00 have been expended, and the road graded to within four miles of the Alabama line, the terminus, by the charter, unless the road unite or consolidate with some other road, as, byits charter, it is allowed to do.

*All this had been done by November, 1872. It does not appear from the evidence when defendant first objected to or dissented from any of the acts of the corporation now complained of by him. Suit for three installments was commenced in October, 1872. It may be reasonably inferred that he made his dissent some time previous to that date—say whenthe first of the three installments for which he was in default was assessed. When that was, does not appear.

Here, then, was a railroad company, whose charter is that "the capital stock shall be $500,000 00." No amount of subscription is prescribed as a condition precedent to an organization or the commencement of the work. The company organizes and commences the prosecution of the enterprise with a subscription of stock to the amount of about $150,000 00. That amount has never been as much as $500,000 00, even with the nominal subscription made by Shorter. Eighteen months after the payment of the first installment, and several months after Shorter had been permitted to cancel his subscription, an amendment to the charter was obtained, authorizing, amongst other things, the company to organize and commence work, when $100,000 00 of stock was subscribed, and legalizing all previous elections of boards of directors, and all the acts of the company theretofore done. Within five months from the passage of this Act, and at the first annual meeting thereafter of the stockholders, regularly called with due notice, wherein more than three fourths of the stock was represented, it was unanimously agreed to accept the amended charter.

It does not appear how much work had been done before this. One installment, at least of five per cent., had been assessed and paid. If the other two had been paid, then fifteen per cent. on $150,000 00 had been assessed and collected, and it is to be presumed appropriated towards the prosecution of the enterprise. If...