Newport & Sherman Valley Railroad v. Seager

Opinion by Porter, J., By the plaintiff’s statement of claim and by the opinion filed by the court below, this action seems to have been originally instituted on the basis of a sale of the bond. It is clear that the paper writing signed by the defendant’s decedent will not support such a contention. No particular bond was set apart [272] or purchased. No bond was issued or delivered. Under these circumstances, there can be no recovery as for the sale of a chattel. Apparently the plaintiff has shifted his ground and here claims to be entitled to recover the subscription price of an unissued bond. He places his reliance upon the case of S. & E. Railroad Co. v. Cooper, 33 Pa. 278. In that case, there was a sale made of the bonds of a canal company, by a railroad company to a third person. The bonds were already issued, and delivered to the railroad company. They were therefore vendible chattels. This marks a fundamental distinction between the case cited and that at bar. Further, however, it is urged that the opinion in that case indicates that a proceeding at law will lie for the subscription price of bonds. The proceeding was in equity. The answer admitted the contract to buy the bonds, and averred willingness to fulfill the same if the bonds were valid. No objection was raised by the defendant to the jurisdiction of the court. In order, as we conceive, that no misconstruction might be placed upon the fact that the court proceeded to decide the case in equity, it is said in the opinion: “ Though we do not regard the case as a proper one for the application of this equitable form of remedy, yet the nisi prius has jurisdiction of the cause of action and it may give redress in the equity form, if the defendant does not demur to the form.” There is nothing here to indicate that specific performance may be enforced in a common-law proceeding, on a subscription to unissued bonds, the defendant objecting. The question here then is, can the estate of William Seager be held on his subscription as shown by the document which is signed? The latter does not indicate to whom the subscription was made. The allegation is that it was to the railroad company. The only evidence of this is the bringing of the suit. Assuming it, however, to be true, the agreement amounts to nothing more than a promise to lend the sum of $500 to the railroad company at a future day, and to take one of the company’s bonds as the evidence of and security for the loan. No consideration for the promise is made to appear. The paper does not indicate that the several names thereto were appended each in consideration of the others. As said by Chief Justice [273] Black referring to a subscription to capital stock in Strasburg Railroad v. Echternacht, 21 Pa. 220, it “ cannot be made out from tbe paper that tbe agreement of tbe defendant was tbe motive of the others for taking stock.” Nor does the fact that the loan was to be made in aid of a public enterprise raise a consideration. While the construction of the railroad may have been incidentally to benefit the public generally, its primary purpose was profit for stockholders. A railroad or other corporation has a right to borrow money for its legitimate corporate purposes within the limits set by legislation, and to issue bonds or other evidences of indebtedness therefor, but it has certainly no higher rights as a borrower than has the private individual. The apparent difficulty in this case is due in part to the skill of counsel, and in part to the analogy which at first seems to exist between a subscription to bonds and a subscription to capital stock. The latter stands on a totally different basis from the former. An enforceable subscription to capital stock is founded on a signature to the recorded articles of association upon which the corporation is based, under legislative provisions: Garrett v. Railroad Co., 78 Pa. 465. This document clearly indicates to the several subscribers the mutuality of the enterprise. The total joint subscriptions create the new entity. The purpose is thus palpably inherently mutual. More than this, however, “ these matters involve not merely private rights but public weal: ” Bucher v. Railroad Co., 76 Pa. 312. The subscriptions to stock are recorded with the articles of Association and form not only the basis upon the faith of which the franchise is secured, but also the capital upon the credit of which the company trades. The difference in the status of the two kinds of subscription to corporate enterprise is thus clearly marked. The particular paper before us does not in our opinion constitute an enforceable obligation. It is rather an expression of intention than a contract. It is at most but a promise to lend in futuro and is nudum pactum. The judgment of the court below is therefore affirmed. Orlady, J., dissents.