Chattanooga, Rome & Columbus R. R. v. Warthen

25 S.E. 988, 98 Ga. 599

• Court: Supreme Court of Georgia
• Decided: June 18, 1896
• Status: Published

Opinion

Simmons, Chief Justice.

The Rome and Carrollton Railroad Company obtained an amendment to its charter in 1886, authorizing it to extend its line from the city of Rome in a northerly direction through the counties of Bloyd, Chattooga and Walker to any point on the line dividing the States of Georgia and Tennessee, in Walker or Catoosa county. Two routes were in contemplation, one of which ran through the town of LaFayette, the county site of Walker county, and the other through another part of the same county; and the citizens of LaFayette, in order to induce the railroad company to ■select the route funning through their town, held a meeting .and appointed committees to obtain subscriptions to the stock of the company. Sufficient subscriptions were obtained to induce the company to select that route. The paper signed by the subscribers was as follows:

“The undersigned hereby subscribe for the number of ■shares of the capital stock of the Chattanooga, Rome & Columbus Railroad Company set opposite our respective names, said shares being of the par value of one hundred •dollars each; and on the 15th day of November, after the cars commence running from a point at or near the city of Rome, Ga., through the counties of Floyd, Chattooga and Walker, in Georgia, to the city of Chattanooga, Tennessee, •over a road built by said company, we promise to pay to ■said company, its associates, successors or assigns, 25 per •cent, of our subscription in cash, and will at the same time give our several individual promissory notes for the remaining 75 per cent., one third of which shall become due eyery six months after said 15th day of November; said notes not to bear interest until maturity, but from and after maturity to bear interest at the rate of six per cent, per annum until paid.

“And when any subscription is fully paid, the subscriber shall then be entitled to a certificate of stock in said company, upon the basis of the capital stock of the company as then fixed and existing at the time of said full payment.

“Provided, however, that each subscription hereto shall be null and void and of no force or effect whatever unless the main line of said railroad, when built, shall pass through the corporate limits of the town of LaFayette, Georgia; and provided further, that these subscriptions are in lieu of all other subscriptions heretofore made by us to the stock of said company.”

N. G. Warthen was one of the subscribers. In June, 1888, the railroad was completed from Rome to Chattanooga, Tennessee, and ears were run thereon on regular schedules. The road was built by a,' construction company, under a contract with the railroad company, and the latter assigned to the construction company a certain amount of its bonds and stock and the subscriptions already obtained, and those that were to be obtained. Warthen’s subscription was of the latter class. His subscription was regularly transferred and assigned, and finally by assignment came into the hands of Jackson, in June, 1892. Jackson made a demand upon Warthen for the payment of his subscription, which was refused; whereupon, the Chattanooga, Rome & Columbus Railroad Company, for the use of Jackson, commenced suit against Warthen. To this action the defendant filed several special pleas, which will be found in the report. On the trial of the case the jury rendered a-verdict for the defendant, and the plaintiff made a motion for a new trial, which was overruled, and it excepted.

1. We will say at the outset, that the paper sued on, although assignable, is not such a negotiable instrument as would protect the holder from equities or defenses that the maker thereof might have against the original holder. It is simply a contract assigned by the railroad company to the construction company. Our code (§2244) provides that “all choses in action arising upon contract may be assigned so as to vest the title in the assignee, but he takes, it, except negotiable securities, subject to the equities existing between the assignor and debtor at the time of the assignment, and until notice of the assignment is given to the person liable.” The paper sued on being one to which the maker can set up any defense, as against the assignee, ■ that he could have set up against the original holder, we will deal with the case as if the original holder were the plaintiff.

2. The paper sued on provides that the subscription, shall be null and void “unless the main line of the said railroad, when built, shall pass through the corporate limits of the town of LaFayette.” In one of his pleas the defendant set up that the railroad did not pass through the corporate limits of the town of LaFayette, and that under this proviso in the contract, the subscription was null and void; also, that it was understood and ag’reed between the railroad company and the defendant that the railroad should be built upon the grade of an old railroad which passed near the center of the town, or upon a line equally near the center; but that the road was constructed outside the corporate limits, or if within the limits, upon the very edge thereof, and this was only a colorable compliance with the conditions and was fraudulent and in violation of the terms of the agreement and subscription, and this fraudulent conduct released the defendant. This plea was demurred to and the demurrer was overruled, and to this ruling the plaintiff excepted.

Under the contract of subscription, we think the railroad company had a right to run its track anywhere within the corporate limits. The contract did not specify any particular line or route through the town. Nor did it provide how far it should run from the corporate limits. It simply provided that it should run through the corporate limits. If that was done, it was a sufficient compliance with the contract so far as the location of its route' was concerned.

8. This contract could not be varied, or new terms added to it, as the defendant sought to do, by proof of conversations with officers or agents of the company, showing an understanding with him that the road was to be built on a particular route within the corporate limits. If at the time of making his subscription he desired that the road should be built upon the old grade, he ought to have had a stipulation to that effect embodied in the writing. If he had done this and the railroad company had failed to comply with the stipulation, such failure would have constituted a good ground of defense. But having signed a contract which contained no such stipulation, and which was unambiguous, be could not show by parol evidence that tbe agreement was that tbe road should be built upon the old grade, without pleading that the agreement to that effect was omitted from the writing by fraud, accident or mistake; (see Bell v. A. P. & L. Railroad Co., 76 Ga. 755; Weston v. Ry. Co., 90 Ga. 289;) and it is not pretended that any part of the contract was thus omitted.

4. Mere statements or promises by the company’s officers or agents, made before the contract of subscription was signed, to the effect that the railroad would be built upon a certain line, and a failure to so build it after the contract was executed, would not constitute a fraud upon the subscriber or afford him any ground for avoiding payment, there being no contention that anything was omitted from the writing which was intended to be inserted therein. In this ease there was no evidence of any fraud whatever; and it was error for the court to charge the jury upon the hypothesis that there was. Mr. Lumpkin, an attorney at law in the employment of Williamson, the president of the construction company, was allowed to testify, over objection, that he received a letter from Williamson in which it was stated that the railroad would be laid upon the old grade; but he could not say whether this letter was dated before or after the defendant’s subscription was made. Of course if it was made subsequently, it would not amount to anything; if made before, it is very doubtful whether declarations of the president of the construction company as to where the road would be located would bind the railroad company. Even if admissible, it does not appear that the defendant knew of the statement before he signed the contract, for Mr. Lumpkin testified that he spoke of this letter only to those who were, as he expressed it, “on the inside.” He kept it a secret because he was the agent of Williamson to secure the right of way and because he feared that if he mentioned it before the right of way was secured the landowners would charge large prices for the right of way through their land. The defendant himself does not testify to any positive promise or statement of any officer or agent of the railroad, that the track would be laid upon the old grade. In his testimony he says: “I think I got that understanding from Mr. Williamson himself, and from parties that were with him at the time the conversation was going on”; but there is nothing in his evidence more definite than this. Thurman, one of the defendant’s witnesses, who was also a subscriber to the stock of the company, testified that he insisted that this stipulation as to the location of the railroad upon the old grade should be inserted in the contract, but that Lumpkin refused to insert it, saying that he was positively instructed not to put it in.

5, 6. Another defense set up by the defendant was, that he subscribed to the stock of the Chattanooga, Rome & Columbus Railroad Company, and that it had sold out its franchises, railroad and other property to another railroad company, and the purchaser could not issue him the stock subscribed for, and for that reason he should not be compelled to pay his subscription. The charter of the Chattanooga, Rome & Columbus Railroad Company authorized it to sell its property and franchises to any other company; and the exercise of this power would not affect the subscription. See Thompson, Commentaries on Corporations, §1291. If the plaintiff company had made a valid and legal sale of its franchises and property to another company, the defendant, under his contract, could have insisted on receiving the stock from the purchasing company when he paid the subscription. It appears, however, from the record, that the sale was set aside by a court of competent jurisdiction, and that the plaintiff company was at the time of the trial still in existence. It is true the company was in the hands of the court, through its receiver, but that did not destroy the corporation. It st-ill lived, and on the payment of the subscription it had the power and right to issue its stock to any subscriber who was entitled thereto. Admitting for the sake of the argument that this plea bad merit in it when it was filed, it bad no merit in it at tbe trial, and it was competent for tbe plaintiff company to prove tbat tbe stock was ready for delivery and would be delivered on payment of tbe subscription. Tbat it bad • no value was immaterial.

7. Tbe subscription contract was signed in September, 1887. In 1888 tbe legislature amended the charter of tbe plaintiff company, thereby making material and fundamental changes. Among other things, it was provided in tbe amendment tbat “unless ten miles of road authorized by this act shall be actually built and equipped within five years from tbe passage of this act, then tbe privileges herein granted shall lapse and become of no effect.” (Acts 1888, p. 171, sec. 5.) There is no evidence in tbe record showing tbat this amendment was ever accepted by tbe company or its stockholders. At tbe time of tbe trial, which was more than five years after tbe act was passed, no part of tbe ten miles bad been actually built and equipped, and tbe amendment bad therefore lapsed and become of no effect. The defendant set up in one of bis pleas tbat tbe amendment was made without bis consent, and tbat it effected a fundamental change in tbe charter, and be was therefore released from bis subscription. Tbe court charged tbat if tbe change was fundamental and made without bis consent, be was released.

Upon tbe facts above recited, we think tbe charge was erroneous. It will be observed tbat the amendment is not mandatory, but merely permissive. It authorizes and empowers tbe plaintiff company to build new roads and to increase its capital stock, but it does not require it to do so. "Whatever may be tbe law as to tbe necessity of a company or its stockholders accepting a mandatory amendment made by tbe legislature in tbe interest of tbe public, it is well settled tbat a mere permissive amendment to a charter must be accepted by tbe stockholders of tbe company. See generally on this subject: 1 Beach, Corp. §36 et seq.) 1 Thomp. Com. Corp. §52 et seq.; 4 Id. §5380 et seq.) 11 Am. Law Reg. N. S. 1. And see Snook v. Ga. Imp. Co., 83 Ga. 65, 66, and cases cited.

The stockholders of the plaintiff company never having accepted the amendment to its charter, nor acted under it, the amendment, .although authorized by the legislature, would not release the defendant from his subscription. Not having been accepted, it did not become a part of the charter, and he cannot complain. 1 Beach, Corp. §42, p. 80, note 1; Delaware, etc. Co. v. Irick, 23 N. J. L. 321.

8. The charter of the plaintiff company, at the time the defendant made his subscription, authorized it to increase its capital stock to ten millions of dollars, to issue income bonds and pledge its property and franchises and pledge the income to redeem them. It also had power to extend its line from Rome, Georgia, to the State of Tennessee, and consolidate with any other railroad authorized to be built by any State in the United States, to build a line of railroad from Cedartown in Polk county to Columbus in Muscogee county, and to build a branch railroad from any point on its line to Montgomery, Alabama, with the privilege of connecting with any other railroad in the State of Alabama, and to build such other branch roads as it might see fit from its main line to any places or points not exceeding twenty miles distant therefrom; it also had authority to purchase or lease any other railroad chartered by the laws of any other State in the Union, and to sell or lease its railroad franchises and property to any other railroad company, and also to consolidate its railroad with the railroad of any other company. In 1890 the legislature passed a general law for the uniform amendment of special charters of railroad companies which had been granted or might thereafter be granted, and provided that a railroad company which had been chartered might apply to the secretary of State and have incorporated into its charter a portion of the general railroad law of the State from section 1689(i) to section 1689(gg) of the code, inclusive, and the acts amendatory thereof. Under this act, the plaintiff compiany had these different sections of the code included in its ^charter. The defendant insisted that this was a material and fundamental change in the charter, and that as it was made after he became a stockholder or subscriber, he was. thereby released from his subscription.

We have carefully read the sections of the code which were incorporated into the charter by this amendment, and they do not differ materially from the charter as it stood before they were incorporated therein. They do' not enlarge the undertaking so far as to entail new responsibilities, or new hazards upon the company. They merely enlarge the powers or privileges of the company, without materially changing its original purpose; nor do they authorize a material departure from its original design. See Thomp. Com. 'Corp. §1278. The charter before it was amended gave the company substantially the samé powers as to extension of its road that section 1689(j) of the code gives. Nor would the latter part of section 1689(m) authorize the railroad company to remove its track from the town of LaFayette. That part of the section means that after the track has been laid within the corporate limits of a town or city, it shall not be changed within the corporate limits without the sanction of the mayor and council or other governing body of the town or city.

9. In so far as the trial judge in his rulings upon demurrers to pleas, in admitting or rejecting evidence, or in charging the jury, failed to conform to what is above announced, - error was committed. The next trial should be had in accord with what is here laid down as the law applicable to this case. Judgment reversed.