Stone v. Monticello Const. Co.

• Citation: 135 Ky. 659,117 S.W. 369
• Parties: STONE et al. v. MONTICELLO CONST. CO.
• Decision Date: 19 March 1909
• Court: Kentucky Court of Appeals

117 S.W. 369

135 Ky. 659

STONE et al. v. MONTICELLO CONST. CO.

Court of Appeals of Kentucky.

March 19, 1909

Appeals from Circuit Court, Wayne County.

"To be officially reported."

Actions by the Monticello Construction Company against E. O. Stone Leo F. Sanders, A. Miller and others, and Joe Marsh. Judgments for plaintiff, and defendants appeal. Reversed and remanded for a new trial.

Stone &amp Wallace, McQuown & Beckham, and Harrison & Harrison, for appellants.

O.H Waddle & Son and Cress & Cress, for appellee.

HOBSON J.

Some years ago a corporation, known as the "Cumberland River & Nashville Railway Company," was organized for the purpose of building a railroad from Corbin, Ky. through Wayne county, into Tennessee. It made a contract for the building of the road from Tateville to Monticello, and this contract was sublet by the original contractors to Plunkett, Edwards & Clark. Some work was one upon the road between Tateville and Monticello, and then it developed that the railroad company was without means. The people about Monticello were very anxious to secure a railroad, and they began to organize a construction company which was to finance the building of the road from Tateville to Monticello. With this view the following written contract was signed by a number of persons interested in the building of the railroad: "Whereas it is proposed to organize a corporation with a capital stock of $100,000.00 divided into shares of $100.00 each under the name of the Monticello Railroad Construction Company, with its chief office at Monticello, Kentucky; said corporation to be organized for the purpose of constructing and building railroads and especially for the purpose of constructing and building the Cumberland River & Nashville Railroad, and taking over to itself all contracts now existing for building the said railroad from the Cincinnati Southern Railway near Tateville, Kentucky, to Monticello, Kentucky, and for such other work of construction as may be contracted for: Now we, the undersigned, agree to take the number of shares set opposite our names, and to pay for same at the rate of $100.00 each in installments as called for by the directors hereafter to be elected. It is further agreed that this subscription shall not be binding until there shall have been $80,000, of the capital stock of the said company subscribed for in good faith. It is further agreed that this subscription shall not be binding until an agreement and contract is entered into by a committee of the subscribers hereto, and the Cumberland River & Nashville Railroad Company, for the construction of said railroad from Tateville to Monticello, Kentucky, nor until satisfactory arrangements shall have been made with the present contractors now at work and holding contracts for work upon said line. Done at Monticello, Kentucky, this October 1, 1907." In October, 1907, when the necessary subscription was said to have been made, the Monticello Construction Company was organized. After the organization of the company, satisfactory arrangements were made with the contractors holding contracts for work upon the line, and a contract was entered into by a committee of the subscribers and the Cumberland River & Nashville Railroad Company for the construction of the railroad from Tateville to Monticello. Certain subscribers refused to pay their subscription when called for, and this suit was brought against them by the Monticello Construction Company to recover the amount they had subscribed. The defendants pleaded that $80,000 had not been in good faith subscribed, and relied on this fact to defeat the action on the subscription paper. On a trial of the action, there was a judgment in favor of the plaintiff, and the defendants appeal.

1. It is insisted for the defendants that the contract is simply an agreement to subscribe for stock when the corporation should be organized and the conditions set out in the agreement complied with, and that under the ruling of this court in Mt. Sterling Coalroad Company v. Little, 14 Bush, 429, no action can be maintained upon the contract in the name of the corporation; but the later cases fully maintain the right of action, holding that the rule was correctly stated in the case referred to, but by inadvertence was incorrectly applied. Twin Creek, etc., Turnpike Co. v. Lancaster, 79 Ky. 552; Bullock v. Falmouth, etc., Turnpike Co., 85 Ky. 184, 3 S.W. 129; Cadiz R. R. Co. v. Roach, 114 Ky. 934, 72 S.W. 280; Curry v. Ky. etc., R. R. Co., 78 S.W. 435, 25 Ky. Law Rep. 1372.

2. On the trial of the case, the defendants desired to interrogate the jurors as to whether any of them were related by blood or marriage to any of the other stockholders in the construction company. The court refused to allow the question answered and of this the defendants complain. The other stockholders in the...