Lyons v. Orange, Alexandria & Manassas Railroad

32 Md. 18, 1870 Md. LEXIS 3

• Court: Court of Appeals of Maryland
• Decided: January 12, 1870
• Status: Published

Opinion

Robinson, J.,

delivered the opinion of the Court.

This was an attachment on warrant by the appellant against the appellee, to recover an indebtedness originally due to him by the Manassas Gap Railroad Company, and which it was claimed the appellee had assumed or become liable to pay.

It appears that negotiations were pending in regard to the transfer of the charter, franchises and property of the Manassas Gap Company to the appellee, and therefore to enable the parties to make this transfer, and for the purpose also of conferring other powers and privileges upon the corporation to be formed by the consolidation of these companies, the Legislature of Virginia passed the following Act of Assembly: “ An Act to authorize the transfer of the property, charter and franchises of the Manassas Gap Railroad Company, and the stock shares in the same, to the Orange and Alexandria Railroad Company.

“ Whereas a petition has been presented to the General Assembly, by the President of the Manassas Gap Railroad Company, setting forth that a contract is being negotiated between said company and the Orange and Alexandria Railroad Company, whereby the charter, franchises and all the .property of the Manassas Gap Railroad Company shall be transferred to, and vested in the Orange and Alexandria Railroad Company; and, also, whereby all the stock held in said company, whether by the State or by the city of Alexandria, by counties or by individuals, shall, with the consent of the stockholders, be transferred to and merged in the said Orange and Alexandria Railroad Company, upon the said last mentioned company complying with, and performing .the terms, stipulations and conditions herein set forth, to wit:

“That the Orange and Alexandria Railroad Company shall commence the rebuilding and construction of the Manassas Gap Railroad Company, within four months from the passage of this Act, and complete it to Harrisonburg within two years from said date, and that the said Orange and Alexandria Railroad Company shall assume the payment of all the debts due by the said Manassas Gap Railroad Company, whether bonded or floating, and whether now ascertained or to be ascertained; and that the charges for transportation of local freight and passengers shall be the same pro rata on the lines of the Manassas Gap and Orange and Alexandria Railroad Company. * * * * Now, therefore,

“1. Be it enaated, That the said companies be and they are hereby authorized and empowered to-enter into a contract containing substantially the provisions above set forth, and with the conditions and restrictions above recited.

“ 2. That when the proposed agreement between the two companies is effected and confinned by the stockholders of both companies, the charter, franchises ” * * * * “ the road and all the property and rights of the Manassas Gap Eailroad Company shall be transferred to, and the title to the same be vested in the Orange and Alexandria Eailroad Company.”

The subsequent sections authorizing the appellee, upon the transfer of the charter, to assume the name of The Orange, Alexandria and Manassas llailroad Company, with the power to increase the capital stock and borrow money, it is unnecessary to insert.

Bow, this Act of Assembly, being an additional grant of powers and privileges to the appellee, an existing corporation, upon certain terms and conditions, it will be conceded that it could not operate or have any binding effect unless accepted. Was it thus accepted, is the question upon which the plaintiff’s right to recover must depend.

It appears that at the time of the trial, the appellee was, and for a long time prior thereto, had been in possession of, and was exercising acts of ownership over the franchises, cars, and other property of the Manassas Gap Company, and had adopted and was known only by the name of the Orange and Alexandria and Manassas Gap Company, From this evidence, if standing alone, it might have been inferred that the appellee had accepted the Act of 1867, upon the terms and conditions therein prescribed, because it is well established, that acceptance may be inferred from the exercise of corporate powers, or other unequivocal acts on the part of the corporators. But this presumption, however well founded, cannot prevail against the direct proof to be found in the following contract, executed by the two companies, declaring, in express language, the terms upon which the transfer of the charter and franchises of the Manassas Gap Company to the appellee was made, and to which its acts of possession and user, relied on by the appellant, are to be referred: “Whereas, the General Assembly, did by an Act passed February 14th, 1867, authorize the transfer of the property, charter and franchises of the Manassas Gap Company, and the stock-shares in the same, to the Orange and Alexandria Railroad Company, on certain terms and conditions therein set forth, and did confer certain other powers and rights on the Orange and Alexandria Company set out in said Act; and whereas, the said companies have accepted the provisions of said Act as hereinafter stated, now, this agreement, made and entered into this 25th day of April, 1867, between the Manassas Gap Railroad Company and the Orange and Alexandria Railroad Company, witnesseth as follows, to wit:

“ It is agreed between the said companies, that the charter, franchises and all the property of the Manassas Gap Company, shall be and are hereby transferred to and vested in the Orange and Alexandria Railroad Company,” * * * “ that the said Orange and Alexandria Railroad Company shall assume the payment of all debts due by the said Manassas Gap Company in the following manner and form, and none other; that is to say, the President and Directors of the Orange and Alexandria Railroad Company shall adjust and settle said debts with the creditors on terms deemed equitable by the said President and Directors and said creditors, having regard to the present financial condition of the Manassas Gap Company and the value of their asssts. * * *

“And it is expressly understood, as a fundamental condition of this contract, that the Orange and Alexandria Railroad Company shall not be bound for more or a greater amount of said debts, or in any other, or different proportions or mode of payment, than shall be finally adopted and agreed upon by the President and Directors of the Orange and Alexandria Railroad Company and the creditors as aforesaid.

“And it is further agreed, that this agreement is subject to the ratification, approval and confirmation of the stockholders of the said companies respectively.

“ Edw’d C. Marshall, [Seal.]

Pres’t Man. Gap R. R. Co.

“ The Orange and Alexandria Railroad Company, by

“ John A. Barbour, Pres’t.”

The question of acceptance must, therefore, depend upon the legal effect and operation of this contract. That the parties to this instrument did not intend, by its execution, to accept the terms and conditions of the act of 1867, we think too clear for controversy. The very recital states that, “Whereas, the General Assembly of Virginia did, by an Act passed February 14, 1867, authorize the transfer of the property, charter and franchises of the Manassas Gap Company, on certain terms and conditions therein set forth, * * * and whereas, the said companies have accepted the provisions of said Act as hereinafter stated, now, this agreement witnesseth,” &c. Ha%dng thus declared the purpose to accept only such of the terms of the statute as are set forth in the contract, the appellee agrees to assume the debts of the Manassas Gap Company, ratably, in proportion to the value of the assets transferred by said company. And, to be the more explicit, if possible, on this point, it is declared as a fundamental condition of the contract, that the appellee “ shall not be bound for more or a greater■ amount of said debts, or in any other or different proportions.” Here, then, is a direct refusal on the part of both companies to accept the powers and privileges conferred by the statute upon the conditions prescribed.

But it is insisted that the appellee had no light to qualify the terms of its acceptance, and that if it meant to accept the statute on terms inconsistent with its provisions, the acceptance was valid so far as consistent, and void so far as repugnant thereto — valid as to the transfer of the franchises and property of the Manassas Gap Company, and the assumption by the appellees of the debts of the former, and void as to the conditions of the assumption, which are inconsistent with the law. In other words, in accepting the privileges conferred by the statute, the appellee necessarily became liable to the burthens inrposed.

As a general rule it is true that, when a charter is granted, whether it be one of creation or an amendment to a preexisting corporation,' it must either be accepted or rejected as offered, and without condition; and that, in accepting the privileges conferred, the grantees will be required to perform the conditions imposed. Angell & Ames on Corp., 85; Grant on Corp., 19; Rex vs. Westwood, 20 Eng. Com. Law Rep., 58. But however well settled this may be in regard to subsequent conditions, to be performed after the organization of the company, and for a refusal to comply with which a party injured may have his remedy at law or in equity for a specific performance, it does not apply to conditions precedent, upon the strict performance of which the very existence and exercise of powers on the part of the corporation depend. And by conditions precedent we mean anything which, by the express provisions of the statute, is made a condition to be performed on the part of the corporators before and as a foundation of the exercise of powers and privileges under the charter. 1 Redfield on the Law of Railways, 171.

In such cases the organic life of the corporation depends upon a strict compliance with the conditions imposed, and until this is done there can bé no such thing as an acceptance of the charter.

In this case the two companies were empowered, by the first section of the Act of 1867, to make a contract in regard to the transfer of the franchises and property of the Manassas Gap Company, to the appellee, upon certain “terms, conditions and restrictions,” set forth in the preamble to the statute. One of these conditions required the appellee to assume “ the payment of all debts due by the Manassas Gap Company, whether bonded or floating, and whether ascertained or to be ascertained; and the second section provided that when such an agreement was executed and confirmed by the stockholders of the two companies, the property and charter of the Manassas Gap Company should vest in the appellee. Here, then, was a special power conferred, to be exercised upon certain terms and conditions. The two companies were empowered to make a contract of transfer, provided the appellee assumed the payment of all the debts of the Manassas Gap Company, and when the contract thus made was confirmed by the stockholders, the property and franchises of said company were to vest in the consolidated company. No such contract, however, was made; but, on the contrary, by the agreement of the 25th of'April, the appellee expressly refused to assume the debts of the former company upon the terms prescribed by the statute. It surely will not be said that an assumption to pay the debts of a company, admitted to be hopelessly insolvent, ratably, according to the value of its assets, is substantially an agreement to pay its debts in full, “ whether bonded or floating, ascertained or to be ascertained.” Such a contract, in our opinion, is inconsistent with and repugnant to the plain and unequivocal provisions of the Act. The condition precedent, in consideration of 'which the amendment to the charter of the appellee was granted — namely, its assumption to pay the debts of the Manassas Gap Company — has never been complied with, and until this is done, neither the execution of a contract, which these companies were not empowered to make, nor acts of user under it, will operate as an acceptance of the amended charter.

(Decided 12th January, 1870.)

This view of the case works no injustice to the appellant. The debt for which he sues, was not incurred by the appellee, nor upon the faith of the contract of April the 25th, but was created by the Manassas Gap Company long prior to the Act of 1867. The fact that the latter company, dismantled and bankrupt by the ravages of civil war, has been rebuilt by the energy, enterprise and credit of the appellee, cannot surely impair the security of his debt, or afford any just ground of complaint.

In what we have said, we are not to be understood as intimating any opinion in regard to the liability of the appellee for debts created upon the faith of the consolidated company. That question would depend upon other principles which it is now unnecessary to consider.

For these reasons the judgment below will be affirmed.

Judgment affirmed.