International & G. N. R. R. v. Bremond

Gould, Associate Justice. It is the opinion of the court that the consolidation of the Houston & Great Northern and the International railroad companies was unauthorized and wrongful as to Bremoud, an objecting stockholder of the former company, and having been consummated by a wrongful appropriation of his equitable interest by the consolidated company, that company became equitably liable to him therefor. All of the members of the court have not reached the conclusion that the consolidation was unauthorized, from the same premises and by the-same process of reasoning, and it is not proposed to enter into an explanation of the reasons for that conclusion, further than to say: that we are all agreed, that the two railroad enterprises differed so widely in their starting points, their routes and the region of country to be traversed, that an original subscriber to the Houston & Great Northern might well object that he had not agreed to or authorized such a union; nor had he, by failing to object to a subsequent enlargement of the charter, which, whether it actually gave such power or not, did not on its face purport to give any power to consolidate, precluded himself from objecting to a consolidation making so fundamental a change in the objects of the corporation. Nugent v. Supervisors, etc., 19 Wall., 241; Angell & Ames on Corp., sec. 391 et seq., and authorities cited. Speaking for myself only, I will say that the policy of the state to forbid the consolidation of parallel and competing railroads is now declared and enforced by a constitutional pro [118] vision. Const., Art. X, sec. 5. In my opinion, that policy liad been plainly indicated in 1873 by introducing like restrictions in the numerous railroad charters -granted during that year, and it was not the design of the act of May 8, 1873, to depart from that policy and confer, an unlimited power of consolidation. We are further of opinion that the plaintiff is not entitled to the personal judgment against the director recovered by him. The consolidation was the act of the stockholders, other than the plaintiff, and was therefore an act for which the directors, as such, should not be held responsible. As directors they were answerable to the corporation for official delinquencies resulting in damage to the corporate property, but it is not perceived that the corporation could hold them responsible for a consolidation effected, not by them as directors, but effected by the act of the stockholders. The rights of the plaintiff are believed to be to equitable relief, and it does not appear to ns, under the circumstances, that equity makes the directors responsible to him. They have not appropriated to themselves, individually, the property of the Houston & G. N. Company, or of the plaintiff, nor have they aided in a technical conversion of plaintiff’s property. If, indeed, they had been guilty of such official misconduct as made them responsible to the Houston & G. N. Company, the plaintiff might, perhaps, by an equitable proceeding, enforce that responsibility and get the benefit of his interest therein. But we repeat that we are unable to see that the directors, as such, are responsible to the corporation whose trustees they were, for the consolidation; or that they, as directors, are liable, legally or equitably, to the plaintiff. Appellants assert that “by his knowledge of what was doing and intended by the company to be done, and his failure to take any steps to prevent it until two years after actual consolidation, during which time the two roads had been run and operated as one road, the plaintiff must be deemed to have acquiesced in the consolidation, notwithstanding he was op [119] posed to it, and therefore is estopped from, now complaining of it.” We have examined with care the authorities cited in support of this proposition, and, except one case not accessible to us, find that most of them are cases in which a court of equity refused to interfere by injunction to prevent the further prosecution of some enterprise, the refusal being justified on various equitable considerations in connection with the presumption of acquiescence. The mischievous effect of the injunction on the interest of the parties and of others, evils which might have been avoided by an earlier application, have been regarded as giving rise to a counter equity precluding a party from that extraordinary relief. Great West. R. W. Co. v. Oxford, etc., E. W. Co., 3 De Gex., Macn. & G., 341; Graham v. Birkenhead, etc., 2 Macn. & G., 146; Hodgson v. Earl of Poriss, 1 De Gex., Macn. & G., 6; Peabody v. Flint, 6 Allen, 52; Tash v. Adams, 10 Cush., 253. In Clegg v. Edmonson, cited by counsel, it is to be noted that the plaintiffs were allowed equitable relief, not dissimilar to that sought in this case. 8 De Gex., Macn. & G., 787. The delay of the plaintiff and the effects of that delay might well preclude him from enjoining the further prosecution of the consolidated enterprise, but not from following up his equitable interest in the hands of a corporation, which, by appropriating it without authority and by assuming the place and obligations of the Houston & G. N. R. Co., became equitably bound to compensate him therefor. Goodin v. C. & W. Canal Co. et al., 18 Ohio St., 169; Chapman & Harkness v. Mad River, L. E. etc., 6 Ohio St., 119. A stockholder may be estopped by his conduct from further objecting to a consolidation which was attempted without authority; but in the present case the conduct and action of Bremond have not, in our opinion, been such as to preclude him from still refusing to go into the new enterprise, or from demanding full compensation for his interest in the old. The consolidation, if illegal when attempted, has since been [120] recognized by law, and for the purposes of this case must be regarded as an accomplished fact. The enterprise in which the plaintiff embarked being at an end, he became entitled to receive his interest in the assets of the Houston & G. N. Railroad Co., remaining after payment of the corporate debts, and to demand it of the consolidated corporation -which had assumed the place and liabilities of that company, and had appropriated its assets. Lauman v. Lebanon R. Co., 30 Pa. St., 42; Black v. Delaware, etc., R. Co., 9 C. E. Green, 465. Appellants claim that the value of that interest was indicated by the market value of the stock, and that Bremond’s recovery should have been limited to that market value. It appears, however, that the subscribers to the Houston & Great Northern Railroad Company were not entitled to stock certificates until their subscriptions were fully paid, and that only forty per cent, of the subscription had been called for or paid by any subscribers, and consequently no stock had issued. In this state of affairs it might well be that sales by subscribers were too rare to give the stock a market value. The inquiry should have extended to the actual value of stock, and as tending to show that value, the defendants were at liberty to show the true assets and liabilities of the Houston & Great Horthem Railroad Company. It appears by bill of exceptions that an official statement of those assets and liabilities, made by the president and directors in 1873, was by agreement read in evidence, and that the court refused to allow defendants to show whether said assets were then worth, or would have brought in the market, the price estimated in the report; the court holding the report conclusive, unless impeached for mistake in the pleadings. This action of the court is one of the errors assigned and urged. Counsel for appellee replies, that the evidence was in fact introduced, referring to the statement of facts. It does appear that the witness was allowed to state that those assets could not have been sold at the valuation put upon them in the report; [121] but after this it also distinctly appeal’s in the statement of facts that the witness was not allowed to testify as to the real value of these assets. Construing the bill of exceptions in the light of the statement of facts, we think it apparent that defendants were precluded from showing the real value of the assets of the Houston & G. N. Railroad Co., and we are of opinion that the exclusion of the evidence offered was erroneous. Surely the company or its present representative, the International & G. N. Railroad Co., is not precluded by erroneous estimates of its officials, though embodied in a published report, from showing the true value of its assets. This error of the court necessitates a reversal of the case. On another trial, the inquiry should be as to the real value of Bremond’s equitable interest in the Houston & G. H. Railroad Co., or the real value of his stock at the time the consolidation was practically effected; or at any period thereafter up to the institution of his suit. His recovery should not exceed that value, with interest, from the institution of the suit. The judgment is reversed and the cause remanded. Reversed and remanded. [Opinion delivered March 19, 1880.]