McCully v. The Pittsburgh and Connellsville Railroad Company

• Citation: 32 Pa. 25
• Parties: McCully versus The Pittsburgh and Connellsville Railroad Company.
• Decision Date: 01 January 1858
• Court: United States State Supreme Court of Pennsylvania

Page 25

32 Pa. 25

McCully versus The Pittsburgh and Connellsville Railroad Company.

Supreme Court of Pennsylvania.

ERROR to the District Court of Allegheny county.

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Williams & Sproul and Woods, for the plaintiff in error.

Foster and Sewell, for the defendant in error.

The opinion of the court was delivered by WOODWARD, J.

A subscription by Crossan, in the name of the defendant, though without precedent authority, was an act that was capable of ratification. The letter of attorney to Kelly, of 29th August 1846, constituting him the defendant's proxy to vote at a meeting of the company on any question that might arise, and the attendance and action of Kelly at a company meeting, were circumstances indicative of ratification, which were proper to be submitted to the jury; and, they having found against the defendant, we are to regard him as a lawful subscriber to the shares of stock, which stand to his credit on the books of the company.

So far, the case is free from all difficulty. But the subscription thus fixed upon the defendant, was made June 9th 1846, and was under an act of incorporation which provided that, if the company did not commence the construction of their road within the term of five years, the charter should be null and void. This act, passed the 3d April 1837, was renewed and extended by an act of 18th April 1843, on the "same terms, conditions, and limitations" as were contained in the original act.

Now, we have held at the present term, in the case of this same company against Matthew Byers, that under this charter the company were bound, from analogy to the statute of limitations, to call in payments on stock subscriptions within six years after their date; or, if the delay was not satisfactorily accounted for, subscribers would be at liberty, after that lapse of time, to consider the enterprise abandoned, and their subscriptions cancelled. The presumptions of abandonment in such cases are very reasonable and necessary. Subscribers to stock are on the same footing as other simple contract-debtors, and equally entitled to protection against stale claims.

But this case is not left to stand on presumptions of abandonment. We have direct and conclusive evidence of it in the testimony of Addison, Kelly, and Robinson. Not only was the project abandoned, but the money of many subscribers was refunded to them, and they released from all further obligations to the company.

True, a contract was made in December 1847, under which work to the amount of a few hundred dollars was done by way of commencing the road; but this was not a bonâ fide effort at construction, but only an expedient to "save the charter," as it was called. And this contract was repudiated in the following month by a formal resolution of the board of directors.

The fact was, that a feeling had sprung up in favour of a western instead of an eastern road, and the company having set their face westward, abandoned necessarily all thought of holding the subscribers of 1846. No calls were made within six years, and no commencement of construction, such as the Act of Assembly contemplated, was made within five years after the act of 1843.

Now, not to say that the charter was forfeited by such inaction, it is very clear that subscribers were released. McCully's undertaking was not only to the company, but with the other subscribers. His subscription, and theirs, were mutual considerations for each other, and to let them off and hold him, is to enforce a contract he never made. He has a right to insist that the company shall perform its charter duties in the time and manner prescribed, and that other subscriptions shall be enforced in the same manner as his own. And, when the company let off part of its subscribers and returned them their money, without the consent of the defendant, actual or implied, they discharged him from all liability growing out of his original subscription. It was like a dissolution of partnership, or an alteration in the fundamental law of an unincorporated society, or the substitution of new and incongruous objects of a corporation; in all of which cases the responsibilities of an original partner or subscriber cease.

The points submitted on the part of the defendant, especially the 4th, 5th, and 6th, put the case to the court as an abandonment of the original subscription.

The learned judge refused to affirm the 4th point, on the ground that the charter of incorporation could not be impeached collaterally, and relied for that on Irvin v. The Lumbermen's Bank, 2 W. & S. 203.

It is not only true, as asserted in that case, that the legality of an existing corporation cannot be inquired into collaterally, but, as has been held in many cases, the inquiry, when directly made, can be instituted only by the attorney-general, or some other prosecutor who represents the public; but, the defence here did not go to the plaintiff's right of existence, but to its right to enforce the defendant's promise. In the case of the Lumbermen's Bank, the suit was on a promissory note which recognised the existence of the corporation. Here, it was on a...