Weatherford, M. W. & N. W. Ry. Co. v. Granger

• Decision Date: 22 January 1894
• Citation: 24 S.W. 795
• Parties: WEATHERFORD, M. W. & N. W. RY. CO. v. GRANGER.
• Court: Texas Supreme Court

24 S.W. 795

WEATHERFORD, M. W. & N. W. RY. CO. v. GRANGER.

Supreme Court of Texas.

January 22, 1894.

Error from court of civil appeals of second supreme judicial district.

Action by Francis Granger against the Weatherford, Mineral Wells & Northwestern Railroad Company for services rendered in procuring a bonus. A judgment for plaintiff was affirmed, at the court of civil appeals, (23 S. W. 425,) and defendant brings error. Reversed.

G. A. McCall, for plaintiff in error. S. B. Cantey, for defendant in error.

GAINES, J.

This suit was brought by the defendant in error against the plaintiff in error to recover upon open account for services rendered. The plaintiff in the trial court obtained a judgment which was affirmed by the court of civil appeals. This writ of error is sued out for the purpose of reversing that judgment. The plaintiff in error, the defendant in the trial court, is a corporation organized under the general law of the state for the purpose of constructing and operating a railroad. The defendant in error, the plaintiff in the trial court, is a practicing attorney at law. The services for which a recovery was ought were for aiding to raise a bonus, and for legal advice and assistance, and were rendered both before and after the filing with the secretary of state of the company's articles of incorporation. The testimony, as shown by the statement of facts, in so far as it bears upon the question before the court, is, in substance, as follows: The plaintiff testified that in March, 1889, he was employed by one Anderson to assist in raising a bonus for the defendant company, and "agreed that the said company would pay him well for his services;" that Anderson was a promoter of the corporation, and represented himself as its general manager, and employed plaintiff not only to assist in procuring the bonus, but to attend to all the company's business as its attorney; that in September, 1889, Anderson allowed his account, and was at that time the owner of a majority of the stock, which he subsequently transferred to one Stone, the president of the company, and his associates. Stone testified, on behalf of the company, that in the spring of 1889, in Kansas City, Mo., he employed Anderson to go to Weatherford and to procure a bonus of $40,000, and survey the right of way for a railroad from that city to Mineral Wells, and to pay him $1,000 for his services; that he had paid Anderson according to his agreement; that he did not know that Anderson had ever employed plaintiff for any purpose; that Anderson was never general manager for the company, and held no office in it except that of director; that he knew that the plaintiff was interesting himself in procuring the bonus, but supposed that he was working for one Johnson, who was one of the charter members, and who owned certain coal lands which he wished to sell to the projectors of the railroad; that plaintiff never said anything to him about the company owing him anything, and that the first he knew of plaintiff's claim was when this suit was brought. There was further testimony, tending to show that Anderson was the chief active promoter of the enterprise, and that he had the principal management of the business from its inception, in March, until he retired in September, 1889; and that during this time the plaintiff was frequently in attendance upon him, aiding and assisting him in procuring the bonus, and otherwise promoting the objects of the company. No controversy is raised in this court as to the fact of plaintiff's services, or as to their value.

The trial judge, as conclusions of fact, found, in substance, that some kind of a company was formed to build the railroad from Weatherford to Mineral Wells; that Anderson was the "principal mover in said scheme and was so recognized by all parties;" that he employed plaintiff to assist him in procuring a bonus and in otherwise advancing the enterprise, and that the plaintiff rendered services under said employment both before and after the articles of the company were filed; that the bonus was raised, and was, after its incorporation, accepted by said company. The court of civil appeals adopt the findings of the trial judge, and additional findings as follows: "The charter of the defendant company was signed and acknowledged about June 1, 1889, and was filed in the office of the secretary of state at Austin July 2, 1889. The bonus or subsidy was not secured until after the filing of the charter. The record would have justified the trial court, and so justifies us, in finding, as we do, the fact to be that in availing itself of the subsidy secured the company knew of the services of the plaintiff in raising the bonus." Under the statute, the corporation came into existence when its articles of incorporation were filed in the office of the secretary of state. Rev. St. arts. 4104, 4105. Although the trial court found that the services for which plaintiff sued were rendered in part before and in part after the filing of the articles, their value was assessed as an entirety at $500, and judgment was rendered for the whole amount. In this there was error. We are of opinion that, under the circumstances of this case as shown by the evidence, the defendant corporation cannot be held liable to the plaintiff for any services rendered by him before it was brought into legal existence.

Upon the question as to the liability of a corporation growing out of contracts made on its behalf by its promoters there is considerable diversity and some conflict of opinion. But there are some propositions affecting this question upon which the authorities seem to be in substantial accord. A promoter, though he purport to act on behalf of the projected corporation, and not for himself, cannot be treated as agent, because the nominal principal is not then in existence; and hence, where there is nothing more than a contract by a promoter, in which he undertakes to bind the future corporation, it is generally conceded that it cannot be enforced. Kelner v. Baxter, L. R. 2 C. P. 174; Melhado v. Railway Co., L. R. 9 C. P. 503. The promoters themselves are liable upon the contract, unless the person with whom they engage agrees to look to some other fund for payment. Kerridge v. Hesse, 9 Car. & P. 200. The statute, however, which authorizes the incorporation, may provide that the corporation, when formed, shall pay the necessary expenses of promoting the scheme. In such a case, though the right of action is dependent upon the contract, the liability is created by the statute. In re Rotherham, etc., Co., 50 Law T. (N. S.) 219. It is even held in England that, although the articles of association bind the company to pay the expenses of its promotion, a third party cannot avail himself of such a provision so as to maintain an action against the company. In re Rotherham, etc., Co., supra; Ely v. Assurance Co., 34 Law T. (N. S.) 190. It is also generally held that contracts by promoters, made on behalf of the corporation within the scope of its general authority, may be adopted by the latter after its organization. Some of the courts say they may be ratified, but ratification presupposes a principal existing at the time of the agent's action, and it seems to us, therefore, that the term is not applicable in its technical sense. McArthur v. Printing Co., (Minn.) 51 N. W. 216; Spiller v. Skating Rink Co., 7 Ch. Div. 368. With the exception of the law courts of England, the rule is also very generally recognized that if a contract be made on behalf of a corporation by its promoters, and the corporation, after its organization, with a knowledge of the facts, accept its benefits, it must take it with its burdens; and, if the other party has performed the stipulation binding upon him, it may be enforced as against the corporation. Spiller v. Skating Rink Co., supra; Tuche v. Warehousing Co., 6 Ch. App. 67. But as to the application of the rule last announced the courts differ in opinion. A leading case upon this subject is Edwards v. Railway Co., 1 Mylne & C. 650. There the promoters of the railway company had entered into a contract with the trustees of a turnpike company, in which the latter agreed to withdraw their opposition to an act of parliament for the incorporation of the railway company, in consideration of an agreement by the promoters to insert certain clauses in the act as to the nature of the necessary constructions at the crossing of the railway and the turnpike road, and the opposition was withdrawn, but the clauses were not inserted; and it was held that the railway company should be enjoined from constructing the crossing in a manner different from that specified in the clauses which had been agreed upon and had been omitted. The correctness of the ruling in this case was seriously questioned in the house of lords in Preston v. Railway Co., 5 H. L. Cas. 605, and in Railway Co. v. Magistrates of Helensburgh, 2 Macq. 391, 2 Jur. (N. S.) 695. We presume the doubt as to this case arises from the fact that the only benefit accepted by the defendant company was the exercise of the powers conferred upon it by the act of parliament. Where the promoters of a railway company have agreed with a landed proprietor, through whose estates the road is projected to run, to take the requisite quantity of his land at a stipulated price, and after the corporation is formed it takes the...