Russell v. Alabama Midland Railway Co.

The railway company (which was chartered under the general law) sued Russell upon a promissory note for $500, payable to the plaintiff, as the amount of his subscription to its capital stock. He filed a number of special pleas which were stricken on demurrer. The nature of them is indicated by the head-notes. They set up, in brief: (1) Failure of consideration and fraud in the procurement of the note, in that the vice-president and other general officers of the railroad company came to Bainbridge for the express purpose of inducing the people of Decatur county to take stock in the enterprise, called a meeting of the citizens, and made to them statements which were false; among others, that the money subscribed to the railway company could not be lost to the subscriber, because the railway was to be built by the Alabama Terminal and Improvement Company ; that the subscriber would receive two thirds of his subscription in the common stock of the railway company and one third in the terminal company; that owing to the advantageous terms on which the terminal [512] •company was to build the railway, it would be utterly impossible to make less than three dollars for every one •dollar invested, and therefore if the subscriber lost the entire amount of stock in the railway company he would .get it back by receiving three for one in the terminal company, etc. Induced by these and other such statements, defendant was misled into signing the note, when he would not have done so had he known that he was ¡signing for worthless stock and that the statements were untrue. (2) He was induced to sign the note by the further statement of said vice-president, that it was impossible for the railway to pass beyond the control of the railway company until after four years, which statement was untrue, the railway having, within less than that time, gone out of the control of the railway company and into that of the Plant Investment Co. (3) In violation of his promises and representations, acquiesced in by the other general officers present, said vice-president drew around him a favored class of individuals and issued to them preferred stock, giving them ten per cent, interest on the same from the time of payment of their subscriptions, and fraudulently concealed this fact from the other subscribers, including defendant; by reason of which issue said preferred stockholders controlled all the assets of the company, paid nothing to the common •subscribers, absorbed the stock of the terminal company, and appropriated the whole of the money paid them by the Plant Investment Co. for the railway, •without accounting for a dollar of it. Also, in violation of its •charter, plaintiff has changed its terminal point from Bainbridge to Thomasville, without defendant’s consent, who would not have signed the note but for the provision of the charter making Bainbridge the terminal point, and but for the representation of said general officers that the terminal point should be there, and so remain, ■etc. (4) In direct conflict with the representations of [513] said vice-president and other general officers, within little more than a year after they were made, the entire control of the railway company, its property and franchises was transferred to the Plant Investment Co. by direct arrangement in which said vice-president represented the railway and terminal companies, utterly ignoring the rights of the stockholders and subscribers to the original railway company; and plaintiff has ceased to own the note and has no further interest therein, but turned over its entire assets, subscription notes, etc., to the terminal company, which is a speculative machine headed by said vice-president, and instead of adhering to the charter and carrying out its contract to build the railway, it has, without defendant’s consent, agreed to build a railroad to Tuscaloosa beyond Montgomery, Ala., and in violation of the constitution of Georgia, bought a railroad in Alabama known as the Luverne extension, made an indebtedness of $500,000 and issued bonds on the same; and said vice-president and his confreres, after representing that only $2,000,000 of stock would be subscribed to the railway and terminal companies (which would be enough to build the road and leave a large surplus to be divided among the stockholders), issued more than that amount in the two companies, issued to a favored few the leading stocks in the ■terminal company, and then sold out to the Plant Investment Co. and left their subscribers in the lurch, with a total loss of the amount they subscribed if they are forced to pay it. (5) Said vice-president made a contract and deal by which all the property and franchises of the railway company passed to the Plant Investment Co., except as to the subscription notes, under-which trade it .is now out of the power of plaintiff' to issue to defendant any stock that is not utterly worthless; and in violation of its charter plaintiff has, by transfer of a majority of its stock, or by absolute sale of its property, [514] or by traffic arrangement, placed its entire business in the hands of the S., F. & W. Railway Co. or the Plant Investment Co., thereby defeating competition, etc.; all without defendant’s consent. (6) Fully stated in the last head-note. W. M. Hammond, Townsend & Harrell, Russell & Russell and Calhoun, King & Spalding, for plaintiff in error. Donalson & Hawes and Harrison & Peeples, contra.