People's Ferry Co. v. Balch

Shaw, C. J. This is an action brought by the plaintiff corporation, to recover $500, a subscription towards the stock of a company first associated without an act of incorporation, but which afterwards became regularly incorporated, for the purpose of establishing a ferry from Boston to East Boston. The first question is, whether this action will lie by this corporation on the subscription paper stated. It is not an action against the defendant for unpaid assessments, as against an actual member of the company; nor an action to recover damage for refusing to become a stockholder and take shares; but upon a promise or executory contract to pay a certain sum of money, to some person authorized to receive the same, for the purpose stated. The paper is in the words following: “ We, the undersigned, agree to pay the sums set against our respective names, to such persons as shall be authorized to receive the same, for the establishment and support of a new ferry from East Boston to Boston, the location of which shall be determined by the committee recently appointed at a meeting of the citizens; provided sufficient is subscribed for the purpose; the same to be represented by the certificates of stock to be created by the company hereafter to be organized. East Boston, January 1st 1853.” The words quoted, including the date, constituted the heading of a subscription book, and the name of the defendant, with the number of shares and the sum, was the genuine signature of the defendant, after other intervening signatures. It appears that this paper writing, which bears date of the 1st of January 1853, was actually signed by the defendant in June 1854. In the mean time, between these two dates, the circumstances of all parties concerned had greatly changed, as appears from the case stated in the bill of exceptions. It is extremely difficult to put any satisfactory construction upon such an instrument, or to determine what are the relative obligations and rights of any persons under it. The rule undoubtedly is, that an instrument takes effect from the time of its execution and delivery; and in order to give effect to this rale, it is settled that the date, even of a deed, is not conclusive evi — 310 — deuce of the time of execution, and that other evidence may be given of the time of the actual execution. Sometimes the fiction of nunc pro tunc may be resorted-to, and the party executing on one day may be held as if it had been done on such previous day, where the circumstances remain the same, so that the contract may be carried into effect, consistently with the manifest intentions of the parties. But where great changes have taken place, so that the performance of the contract has becorre impossible, or where it cannot be carried into effect, so as to accomplish the manifest intent of the parties, such rule will not apply. We will endeavor to consider it under various aspects. 1. Taking this paper as an instrument, whether a contract with anybody or not, executed in June 1854, and taking its effect as of that day, we are of opinion that no action can be maintained upon it by the plaintiff corporation. This company had then become duly incorporated and organized, capable of contracting and being contracted with; and no promise being made to them by their corporate name, or any other, or to any person for their use, they cannot sue upon it. According to the best view which can be taken of it by the plaintiffs, it was a promise to pay a sum of money, as one of a company, for the purpose of establishing a ferry. Such company might become incorporated, as it actually did, in which case it would, in effect, be an undertaking to become a holder of shares to a certain amount, and the obligation he would incur would be that of paying assessments, pari passu with other stockholders; whereas all the assessments which could be laid had been laid on those who were stockholders in this corporation, and most of them had been paid. Instead of a stipulation to pay instalments, or to pay, as all other subscribers would be obliged to pay, according to the terms of the subscription paper, it must be construed as an undertaking to pay the whole amount subscribed for, at once. Instead of a promise to pay the sum subscribed to some person to be authorized by the voluntary association therein mentioned, it must operate as a promise to pay an existing corporation. All the cases, we think, in which it has been held that an — 311 — action would lie against a subscriber for stock, were promises to pay to a company when incorporated, so that it might be considered as in the nature of a standing offer to pay such company when incorporated ; and such corporation was formed before such offer was revoked, and the company accepted such offer, and received the subscriber as a member of the corporation, when the contract was complete. New Bedford & Bridgewater Turnpike v. Adams, 8 Mass. 138. Essex Turnpike v. Collins, 8 Mass. 292. Here there was no necessity and no occasion for such a mode of proceeding, because the associates had already formed a corporation, for the express purpose, and with a capacity to make any and all contracts incident to the establishment of their ferry. 2. Regarding this as an instrument made as of January 1853, although in fact executed in June 1854, it was still a written instrument, and the defendant can only be bound according to its terms expressed, or reasonably implied. As such, it contemplated a state of things, which, at the time of its actual execution, had passed away and ceased to exist; it looked to a course of things, which had become impossible. It contemplated the procuring of an act of incorporation, because that was one of the convenient modes of proceeding, to which a voluntary association might and would be likely to resort, to facilitate their proceedings, and to which they did resort, which incorporation should embrace all the associates as members, including the defendant. In the formation of such an act, and fixing its terms, the defendant would have an equal voice with the other associates. It looked to an organization, to a choice of directors, to the laying of assessments, to the determination of the question whether money enough had been subscribed to constitute a sufficient fund to warrant the commencement of the enterprise. Whether this determination should be made by the body of stockholders, or by the directors appointed by them, or in any other way, the terms of the subscription looked to a determination of this question in some mode authorized and directed by the stockholders, on any of which questions all the stockholders would have an equal voice, either per capita, or in — 312 — proportion to the amounts subscribed. These were powers and privileges which the defendant, by the terms of his undertaking, as an engagement for things to be done at times then future, was to enjoy, in common with all the associates. But these had become utterly impossible by intervening events. The act of incorporation had been obtained, the corporation organized, the directors chosen.- With or without any determination by the stockholders, the directors, or otherwise, that funds enough had been subscribed, (no evidence of any such determination anywhere appearing,) the company had made large purchases and contracts, in which it was not possible that the defendant could have any voice, and therefore it was not the contract into which, by a subscription to.that paper, he had come. 3. But whether this be regarded as executed on the 1st of January 1853, or in June 1854, and if there were proper parties to make it' a contract, it was a written contract to be construed and earned into effect, according to its terms; and, by its terms, it was conditional. The liability of the defendant, either to contribute capital for a joint stock company, or to take shares in an incorporated company, was made to -depend on the expressed condition, “ that sufficient is subscribed for the purpose.” The whole is to be taken together and to have a reasonable construction, according to the intent of the parties. A sufficient amount must be subscribed. It might never be paid, because some might become unable; but it must be an undertaking, received in good faith, on the part of the company or associates, to take and pay for the sums subscribed. A subscription from a party, with an assurance given him that he should not be called upon, or that it should be optional with him, at a future time, whether to take such shares or not, would not be a subscription in good faith, nor satisfy the condition. Again, what is intended in the contract by the word “ sufficient ” ? The expression “ sufficient for the purpose,” if alone, might be a little equivocal; but it is explained by the previous part of the paper, stating that purpose to be “the establishment and support of a new ferry from East Boston to Boston.” This was the enterprise; and the plain effect, probably the actual intent, — 313 — was, that no one should be liable to pay or contribute anything until money enough was promised, and at least engaged for, to accomplish this enterprise. Now^ as the capital was to be raised, that is, engaged for, subscribed, before the work could be done, or even conclusively contracted for, this clause constituting the condition precedent, must have been understood by the parties, and must now be construed by the court, to mean a sufficient sum, as estimated by persons of competent skill and judgment, with the aid perhaps of-offers, and tenders and provisional contracts, and not the actual cost. Then as to the amount, it must be sufficient, as ascertained by such estimates, to meet the necessary outlay, the purchase of land, the cost of buildings, wharfs, ferry ways and other real estate and fixtures, and for the purchase of suitable and proper boats, with their apparatus. It must be such a sum as, according to a fair estimate, when all the land, fixtures and other property purchased should be paid for, and the contracts of the company fulfilled, and their debts paid, would leave them owners of the property, and free of debt contracted on account of these great and necessary original outlays. The court are therefore of opinion, that it was not a compliance with this condition, that a sufficient sum was in good faith, subscribed, such as, in the opinion of the directors, or of the company, or of the jury now, would lead them to believe that they might, with reasonable safety, begin the enterprise, and afterwards, by the aid of the capital actually subscribed and the prospect of success in its execution, would give them a credit, and enable them to raise money sufficient to proceed and complete the enterprise, and place them above the reach of those fluctuations which attend a business done on mere credit, and which, in certain states of the money market, operate to check or put a stop to the enterprise. This, we think, was not the standard of sufficiency contemplated by this contract; it looked to the raising of a capital stock sufficient to meet the cost, and the payment, by each individual, of an aliquot part of that capital; but the actual sum being then uncertain, such estimated amount was taken, instead of a fixed capital in — 314 — money. And this was not a merely formal or technical condition, but it was of the essence of the subscriber’s contract, and prescribed limits to his liability. To test this, let us examine its practical operation. Suppose, for instance — assuming these numbers for the mere purpose of illustration — that the whole estimated necessary cost of the ferry should be $250,000, that sum would stand in the place of a capital expressed in money. Supposing this divided into 10,000 shares, at $25 each, making the entire capital. The defendant’s subscription for twenty shares at $25 — $500 would be 5i|g, or — of the entire stock. But if a money capital subscribed of one half of the cost, with a prospect of success in the enterprise, would give them sufficient credit, so that cautious and prudent men might think it safe to make a beginning, trusting to such credit for the other half, then, when $125,000 were subscribed, they might commence, and must of course go through. The consequence to the defendant would be, that instead of standing responsible for 655 part of this enterprise, and receiving that proportion of the stock, he would stand responsible for or double the amount he engaged for. It would be equivalent to insisting that, though he agreed to take twenty shares, he must take forty. If the enterprise should be a profitable and brilliant one, and the stock above par, this would be no hardship ; but in case it should fall below par, as it might, and it is the only case in which the company would have occasion to require him to take his shares, the answer is obvious, such was not his contract. It is analogous, in principle, to the case where the capital is fixed by the act of incorporation, or the articles of association, at a stated sum in money, with a provision that no subscriber shall be holden till that amount is subscribed. Salem Milldam v. Ropes, 6 Pick. 23, and 9 Pick. 187. If, instead of having a sufficient sum subscribed, to cover the estimated cost of the undertaking, they have only enough to enable them, in the judgment of discreet men, to begin the enterprise, say one half, $125,000, and with their credit for an equal sum to complete it, the result would be, that when the whole of these sums should be paid in as subscribed for, — 315 — and appropriated, they would stand indebted, in some form, to the amount of one half of the cost of the works. This is the more significant, because there is a provision in the act of incorporation, St. 1853, c. 422, § 3, restraining the company from issuing new shares at a rate less than par. There would therefore be no means of paying this debt, but an assessment on the existing stockholders, and even-this was prohibited by a by-law. But supposing this by-law to be repealed by the company, and the shares made subject to assessment, the defendant would be liable to double the amount of that for which he would have been liable, if a sufficient amount had been subscribed for, to complete the enterprise, before they begun — con trary to the express condition of his contract. This principle would not prevent the company from using their credit in making purchases and contracts. It would not be necessary that they should have ready money in all their dealings; but the sum should be such that, when all contracts should be performed, and all real and personal property paid for, and the subscriptions collected, the company should be substantially out of debt, and hold the property free from permanent incumbrances. An argument, slight perhaps, but tending to the same conclusion, may be drawn from section 9 of the above act, authorizing the City of Boston to purchase this ferry. The city is authorized to purchase the ferry of said company, and all the franchise, property, rights and privileges, by paying them therefor such a sum as will reimburse them the amount of capital paid in, with a net profit, Sic. It presupposes that a capital stock shall have been paid in, equal, at least, to the cost; and that the capital stock and the cost of the establishment were equivalent to each other; otherwise the statute would countenance the monstrous proposition, that the city might purchase the establishment on the payment, according to the supposition before made, of half the cost. Much of the report is taken up with matters relating to the amount subscribed, and to admissions and rejections of evidence, which we have not thought it necessary to examine, — 316 — because the report shows that the first contracts and purchases made by the company amounted to $285,000, and there was no intimation on the part of the plaintiffs, that more than $175,000 was subscribed. Much of this was alleged to be colorable, optional with the subscriber, or conditional, or rescinded; but we have not thought it necessary to express any opinion! upon these points, because, for the reasons stated, they were immaterial to the issue. The rulings of the court, under which the verdict for the plaintiffs was found, being in our opinion incorrect, upon the questions whether the action could be maintained by these plaintiffs, and' whether the condition of the defendant’s contract had been complied with, the verdict must be set aside, and a new trial granted. Exceptions sustained