Mount Holly Paper Company's Appeal

Chief Justice Shabswood delivered the opinion of the court February 13th 1882. The Act of Assembly passed February 19th 1849, entitled “ an Act regulating railroad companies,” Pamph. L. 79, provides “ that' whenever a special Act of the General Assembly shall hereafter he passed, authorizing the incorporation of a company for the construction of a railroad within this Commonwealth,” such company shall be subject to the regulations contained in that Act. By the seventh section, after enacting that certificates of stock shall be issued, “ which certificates of stock shall be transferrable at the pleasure of the holder, in a suitable book or books to be kept by the company for tliat purpose, in person or by attorney duly authorized, in the presence of the president or treasurer,” it is “ provided that no certificate shall be transferred so long as the holder thereof is indebted to said company, unless tlie board of directors shall consent thereto.” The West Philadelphia Passenger Pailway Company was incorporated by Act of Assembly passed May 14th 1857 (Pamph. L. 1858, 585, appendix), and we are clearly of opinion that it was subject to the general regulations of the Act of 1849, unless specially altered in that charter, or inconsistent therewith. It is not pretended that there is any such alteration or inconsistency so far as the provision as to the transfer of certificates is concerned. It is contended, however, that the Act of 1849 speaks of acts authorizing an incorporation, whereas, by the Act of 1857, the appellees were directly incorporated. We think, however, that this is a distinction without a difference. Tlie legislature evidently meant that all companies incorporated by or under special Acts should be subject to tlie general regulation of the Act of 1849. The appellants were holders of certificates of stock fraudulently issued in excess of the number of shares authorized by [520] the charter. They had become holders by the delivery to them of a power of attorney from John-S. Morton, in whose name they stood — who was the president of the company, and by whom they had been fraudulently issued. They had not taken the necessary precaution to have them transferred on the books of the company. Had they done so without thei consent of the Board of Directors, a different question might have arisen. The company was liable, we may assume, for the fraudulent issue of the stock by their officers; but certainly, the holders can have no other or higher right than the bona fide holder by assignment and power of attorney of a real certificate issued to John S. Morton, as an original subscriber, and standing on the books of the corporation in his name. John S. Morton was heavily indebted to the company, on separate and independent transactions, altogether different,’ and superadded to i liis liability to the company for his fraud. The appellants, as to the stock standing in the name of John S. Morton, whether fraudulently issued in excess of the charter or not, stand in his shoes as against the company. It matters not when Morton’s debt to the company had been incurred. By the provision of the law he could not transfer such stock without the consent of the board of directors. In fact, it never was transferred. It is said, however, that these certificates fraudulently issued were null and void. They evidenced no stock. It is asked, triumphantly, How can there be a lien on that which had no existence? The argument is certainly ingenious, but it rests upon a misapprehension of the rights of the appellants. Their claim on the company was not, indeed, on the stock. It was a claim to be indemnified for the fraudulent acts of the officers of the company, from which they allege that they have suffered damage. They might have demanded a transfer, and upon refusal have brought an action for damages. The defence to such an action could have been Morton’s indebtedness. If, instead of taking that course, they had sued for damages for the fraudulent act, they could still have been met by the same plea. If you had been in possession of valid certificates, you could not have recovered for a refusal to allow you to transfer ; how, then, can you recover on these false and fraudulent certificates ? This would clearly be inequitable; and this proceeding is in a court of equity. We think there was no error in the decree of the court below. Decree affirmed, and appeal dismissed at the costs of the appellants.