State ex rel. St. Joseph & Denver City Rld. v. Comm'rs of Nemaha County

10 Kan. 569

Opinion

The opinion of the court was delivered by

Brewer, J.:

Plaintiff applies to this court for a mandamus to compel the defendants to issue to it the bonds of the county of Nemaha to the amount of $125,000 in payment of an alleged subscription to the capital stock of said company. The facts as it claims them to exist are substantially as follows: In 1866 there were two railway corporations existing, the one known as the St. Joseph & Denver City Railroad Co., and the other as the Northern Kansas Railroad Co., each organized to construct a railroad from El wood to Marysville, and also to receive subscriptions to its capital stock from the county of Nemaha. The county commissioners of said county duly submitted to the voters of said county the question of subscribing to the capital stock of the Northern Kansas Railroad Co. to the amount of $125,000, and issuing the bonds of the county in payment therefor. On the second Tuesday of May 1866 an election upon such question was duly held, and resulted in a majority vote in favor of making such subscription and issuing such bonds. The canvass of the votes cast at said election was duly made, and the result determined. On the 9th of October 1866 the said two corporations were duly and legally consolidated into a single corporation by the name and style of the “ St. Joseph & Denver City Railroad Co.” On the 3d of January 1870, in pursuance of the authority given by said vote on the second Tuesday of May 1866, the county commissioners of Nemaha county made a subscription to the capital stock of the St. Joseph & Denver City Railroad Co. to the amount of $125,000. The conditions as to the amount of work to be done towards building a railroad prescribed by the vote were complied with, and a railroad completed and operated by said company plaintiff through the county of Nemaha; and thereafter the plaintiff tendered a certificate of its fully paid-up stock to the defendant and demanded the bonds, which demand was refused. Upon these facts is the plaintiff entitled to a writ of mandamus?

The county commissioners are the agents of the county, but agents with limited and defined powers. They cannot by virtue merely of their office bind the county to a subscription to the capital stock of a railroad corporation, any more than could the sheriff, county clerk, or any other county official. A power so vast, and whose exercise affects so widely and deeply the interests of the county, is wisely entrusted to no official or agent. The people must give their agents the authority to subscribe, or they are not bound. We must look therefore beyond the mere fact of subscription to see what authority the commissioners had to make the subscription. The vote of the second Tuesday of May 1866 is the alleged authority.' Was it authority? The subscription is not within the express terms of the authority. That vote empowered the commissioners to subscribe to the stock of the “Northern Kansas Railroad Co.” The subscription was to the “St. Joseph & Denver City Railroad Co.” Upon authority to make the county a stockholder in one corporation, they attempted to make it a stockholder in another. Prima facie, then, their act was vibra vires. Nor is it simply a case of change of names. Something more has been done than to change the corporate name. The consolidated corporation is a new and different one from either of the original. It unites the rights, franchises and obligations of two organizations to form a third. The effect of the consolidation was a dissolution of the two corporations and at the same instant the creation of a new corporation with property, liabilities and stockholders derived from those passing out of existence: McMahan v. Morrison, 16 Ind., 172; Clearwater v. Meredith, 1 Wallace, 40. The statute authority for railroad consolidations in force at the time of this consolidation is to be found in the laws of 1865, pp. 101, 102, 103, ch. 44, §§ 22, 23, 24. These sections contain these provisions:

“Any railroad company forming a continuous or connected line with any other railroad company may consolidate with such other company * * * into a single corporation. An agreement may be made by the directors for the consolidation prescribing the terms and conditions thereof, * * * the name of the new corporation, the number of shares of capital stock in the new corporation, the amount of each share, * * * the manner of compensating stockholders in each of said two or more corporations who refuse to convert their stock into the stock of such new corporation; and such new corporation shall possess all the powers, rights, and franchises conferred upon such two or more corporations: * * * Provided, that all the stockholders in either of such corporations who shall refuse to convert their stock into the stock of such new corporation, shall be paid, etc. Upon making the agreement * * * said two or more corporations shall be merged in the new corporation. * * * Upon the election of the first board of directors of the corporation created, by the agreement * * * the rights and franchises of each and all of said two or more corporations, parties to such agreement, * * * shall be deemed to be transferred to and vested in such new corporation, * * * and such new corporation shall hold and enjoy the same: * * * Provided, that all rights of creditors, and all liens upon the property of either of said coi'porations, parties to said agreement shall be and are hereby preserved unimpaired, and the respective corporations shall continue to exist so far as may be necessary to enforce the same.”

It will be seen from these quotations, and more clearly from a reading of the entire sections, that not merely is the ■consolidated corporation called a new corporation, but that in fact a new organization, an original, separate corporation is by this process called into existence. The old are merged into the new, except so far as their existence is necessary to preserve the rights of creditors and enforce liens. In the amount of stock, the number of shares, the number of directors, the time and place of electing them, the rights and •franchises, and the obligations and responsibilities, as well as in the name, the new may differ from either of the old. It is therefore in fact as well as in name another corporation. But it is said that the Northern Kansas Railroad Co. was, in pursuance of law, and by the act of consolidation merged in the St. Joseph & Denver City Railroad Co., and that the latter succeeded to all the powers, rights, and franchises, and .assumed all the debts, liabilities, and duties of the former. This is all true, but it does not avail the plaintiff anything. The mere vote of the people giving the commissioners authority to subscribe created no contract between the county and the company — gave the latter as against the former no rights, and imposed no duties. The company had nothing which it could transfer — nothing which its successor could take. The Northern Kansas Railroad Co. could not by virtue of the vote compel the commissioners to subscribe; neither could the county compel the company to build its road in compliance with the conditions of the vote. . Neither had, as against the other, any rights, whether of action or otherwise. So, that though the consolidation transferred all the rights and franchises of the Northern Kansas Rld. Co., it transferred nothing as against the county of Nemaha. This point has been settled in this court by the decision in the case of the L. G. Rly. & Trust Co. v. Comm’rs of Davis Co., 6 Kas., 256. (See also the authorities cited in the opinion of the court in that case.) It is unnecessary therefore to pursue this inquiry further.

Again, it is urged that the law authorizing the consolidation of railroads was in force at the time of the vote, and that therefore the vote was based upon that law, and authorized the commissioners to subscribe to the stock of the Northern Kansas Rid. Co., or to that of any other company into which it might be consolidated. We do not so understand the law of agency. Authority from a principal to an agent to do a specific act is limited to that act, and does not empower the agent to bind his principal to an act securing essentially different rights, and imposing essentially different obligations. Nor is the authority enlarged because the party with whom the agent is empowered to contract is by laAV at liberty to change his conditions and relations. A principal empowers an agent to invest his money in a certain named partnership, with specific amount of capital. Noav any partnership may, with the consent of its members, change its name, admit new members, and increase its capital. When all this has been done, will any one contend that the agent may by.virtue of the original authority invest his principal’s money in such new partnership ? Yet the cases are parallel. Each is a case of principal and agent. In each the authority is specific and definite. Each party with whom the contract is to be made has, by law in force at the time the authority is given, the power to change its relations and conditions. It does make such change, a change which would materially affect the rights and obligations of the parties to the contract if executed. In each the authority of the agent fails. Indeed, it may safely be affirmed, as a general rule, that where an agent has authority to make a specific contract with a third party any change in the conditions and relations of that party which would materially modify the contract destroys the power of the agent. Again, it has been often held that even • after a subscription has been made to the capital stock of a corporation if a material change be made in the charter by which a new and different business is superadded to that originally contemplated, or its purpose and powers altered, such of the stockholders as do not corisent to the alteration will be released from liability on their subscription: Supervisors of Fulton Co. v. M. & W. Rld. Co., 21 Ill., 339; Middlesex Turnpike Co. v. Swan, 10 Mass., 384; B. C. & N. Y. Rld. Co. v. Pottle, 23 Barb., 21; Hartford & N. H. Rld. Co. v. Croswell, 5 Hill, 383; Middlesex Turnpike Co. v. Locke, 8 Mass., 268. True, this doctrine has, at least to its full intent, been considered inapplicable in cases where by the terms of the charter the legislature reserved the power to alter and modify it, (Schenectady & S. Rld. Co. v. Thatcher, 11 N. Y., 102,) and may in this state be greatly limited by § 1 of art. 12 of the constitution, which provides that “corporations may be created under general laws, but all such laws may be amended or repealed.” Yet, if in any case a material change in the corporation can avoid a subscription a fortiori will it annul a mere authority to subscribe. But it is unnecessary to inquire how far the legislature has power, after subscription, to change the relations and liabilities of stockholders, for so far as the law authorizing consolidation is concerned it expressly reserves to each stockholder of the old the right to determine whether he will become a stockholder in the new corporation. It contains this clause: “Provided, that all the stockholders in either of such corporations, who shall refuse to convert their stock into the stock of such new corporation, shall be paid at least par value for each of the shares so held by them, if they shall so require, previous to said consolidation being consummated.” So that if the county of Nemaha had actually subscribed to the stock of the Northern Kansas Rid. Co. it might still have declined to become a stockholder in the company plaintiff. See, as sustaining the general views herein expressed, Supervisors Fulton Co. v. M. & W. Rld. Co., 21 Ill., 338; Marsh v. Fulton Co., 10 Wal., 676; Carlisle v. T. H. & R. Rld. Co., 6 Ind., 316; McMahan v. Morrison, 16 Ind., 172; Clearwater v. Meredith, 1 Wal., 25; Bell v. Railway Co., 4 Wal., 599.

We have considered this case as though the facts claimed by the plaintiff were proved; and as upon them we think its case must fail it is unnecessary to inquire how far the testimony sustains the allegations. Judgment will be entered in favor of the defendant.

All the Justices concurring.