Union Ry. Co. v. Sneed

• Decision Date: 24 April 1897
• Citation: 41 S.W. 364,99 Tenn. 1
• Parties: UNION RY. CO. v. SNEED et al.
• Court: Tennessee Supreme Court

41 S.W. 364

99 Tenn. 1

UNION RY. CO. v. SNEED et al.

Supreme Court of Tennessee.

April 24, 1897

Appeal from chancery court, Shelby county; John L. T. Sneed Chancellor.

Bill by the Union Railway Company to collect a balance due on a subscription of stock made by W. M. Sneed. From a decree for complainant, defendants appeal. Reversed.

Thos H. Jackson, for appellants.

S. J Shepherd and W. P. Metcalf, for appellee.

WILKES J.

This is a bill to collect the balance of a subscription made by W. M Sneed in his lifetime to the increased capital stock of the complainant company. There was a decree in the court below for the amount claimed, and costs, and defendants have appealed and assigned errors. The contention is that the estate of W. M. Sneed is not bound for the subscription, inasmuch as it was ultra vires, illegal, and void. There is no cross bill to recover back the amount paid.

The railway company was organized in April, 1886, under the general incorporation laws of 1875; and on the 24th of May the capital stock was fixed by law at $27,000, all of which was subscribed. On the 6th of January, 1890, the directors of the corporation passed a resolution increasing the stock to $60,000; and on March 31, 1891, the directors, by resolution made another increase of the capital stock to $100,000. W. M. Sneed subscribed for stock after the increase from $27,000 to $60,000, and was not an original subscriber. He became a director in the company after making his subscriptions. The contention is that the attempted increase of stock from $27,000 to $60,000, and afterwards to $100,000, was illegal, and not binding upon the subscribers, because not made in compliance with chapter 163, Acts 1883, which was for $50,000 in all. Sneed paid calls upon his subscriptions as follows: April 10, 1891, $1,000; May 10, 1891, $1,000; August 3, 1891, $1,000; April 19, 1892, $100; September 21, 1892, $175. The judgment rendered for the balance is $2,301.32, including interest upon the unpaid calls. The amount of the judgment is not questioned, if there is any liability whatever, but the contention is that there is no liability. The subscription sought to be collected was made April 1, 1891. Under the general incorporation act of 1875, c. 142, it is provided that "the board of directors may at any time increase the capital stock if the necessities of the corporation in their estimation require said increase." By the act of 1883, c. 163, it is provided that any persons organized as a corporation under a charter granted by a chancery court of this state or under the act of 1875, c. 142, approved March 23, 1875 (which is the general act of incorporation), who may desire to increase its capital stock, shall have the right to do so under and in the manner provided by the 19th section of said act of 1875. That section provides, among other things, that the board of directors shall copy the desired amendment, make formal application to the state, and have the amendment probated and registered, and its registration certified by the secretary of state under the great seal of the state,-provisions similar to those upon the original incorporation. This act was in force when this increase of stock was made, though afterwards repealed by the act of 1893, c. 146, § 1. The first question presented is, what is the effect of the act of 1883 upon the act of 1875? It is argued before us that the act of 1883 repeals the act of 1875, so far as it relates to the manner in which the capital stock of a railroad may be increased, and that such repeal arises by implication; the power to repeal, modify, or amend charters under the act of 1875 being expressly reserved by the legislature, under sections 5 and 27 of that act. The only provision in the act of 1875 relating to the increase of the capital stock of charters taken out under that act is found in section 6 of the act, which simply provides, as before stated, that "the board of directors may at any time increase the capital stock if the necessities of the corporation in their estimation require said increase." It is true that section 19 prescribes how the capital stock shall be increased, but that section applies only to corporations theretofore chartered by the general assembly; referring to such as previous to the constitution of 1870 had obtained their charters under special acts of the general assembly, and not to such as were provided for by the general law of 1875. Acts 1883, c. 163, refers alone to charters granted by a chancery court, or taken out under the Acts of 1875, and prescribes that they shall pursue the same mode as prescribed by section 19, Act 1875, for charters granted by the general assembly. We think we need not, therefore, consider the question of the repeal of the act of 1875 by the act of 1883, as the latter only prescribes the manner in which the capital shall be increased, which was not prescribed or fixed under the act of 1875, as to charters under that act. There is no contention here that the act of 1883, c. 163, has been complied with as to the application and registration required by that act, or by section 19 of the act of 1875, to which it refers, and without such compliance the amendment or increase is void. Brewer v. State, 7 Lea, 682; Anderson v. Railroad, 91 Tenn. 44, 17 S.W. 803. The question presented in this case was raised in the case of Cartwright v. Dickinson, 88 Tenn. 476, 485-487, 12 S.W. 1030, but was not decided, not being necessary for the disposition of that case; Cartwright, the protesting stockholder in that case, being a subscriber to the original stock of the company, and not to the increased stock. The result is that the increased stock was illegal and void, and the subscriber to the increase stands, not in the attitude of a stockholder, but in that of a creditor having advanced money upon a void contract, and, having received no consideration therefor, is entitled to recover the same back. 3 Thomp. Corp. § 3691; Schierenberg v. Stephens, 32 Mo.App. 314; Nichols v. Stephens, Id. 330; Winters v. Armstrong, 37 F. 508. In the latter case, Judge Howell E. Jackson says: "Such a subscription is impliedly conditioned on the subscription of the whole amount of the proposed increase, and on the compliance by the corporation with all the requirements of the statute...