FOURTH DEPARTMENT, OCTOBER TERM, 1880. THE BUFFALO & JAMESTOWN RAILROAD COMPANY, THE SAME, RESPONDENT, v. ERIE L. HALL, APPELLANT. THE SAME, RESPONDENT, v. HORACE H. GIFFORD, Railroad company—when a subscription to its capital stock, made before its incorporation, is valid—when a subscriber is not released by its failure to complete the road-or by its sale on foreclosure. The defendant, a few days prior to the organization of the plaintiff under the general railroad act of 1850, signed an agreement in writing, by which the subscribers thereto, in consideration and for the purpose of becoming stockholders in the said company, agreed to take the number of shares of its capital stock set opposite to their respective names, and to pay for the same in such time and manner as required by the company. After its organization the plaintiff accepted the subscription of the defendant, and made an assessment of ten per cent. upon the amount so subscribed, which assessment was paid by the defendant. In an action to recover the amount of certain other assessments subsequently imposed upon the stock, Hell, that the agreement of the defendant to subscribe to the capital stock of Erie & N. Y. City R. R. Co. v. Owen, 32 Barb., 616, and Troy & Boston R. That the objection that the agreement was invalid, because the corporation What acts of a corporation amount to an acceptance of such a subscription, considered. The articles of association contemplated a road from the city of Buffalo, through the counties of Erie, Cattaraugus and Chautauqua to a point in the State line in the southerly boundary of the latter county. The road had been built from Buffalo to a village in Chautauqua county, distant some fourteen miles from the State line, and its further construction abandoned. It did not appear that the abandonment was effected by a resolution of the board of directors or by any alteration of the articles of association, or that it was anything more than a mere cessation or suspension of the work. 22 359 30a p336 FOURTH DEPARTMENT, OCTOBER TERM, 1880. Held, that the defendant was not thereby released from his liability upon his subscription. Hell, further, that he was not so released by reason of the fact that the road and the franchises of the company had been sold upon the foreclosure of a mortgage given by the company. APPEAL from a judgment in favor of the plaintiff, entered on the decision of a justice of this court, upon a trial had at the Erie Circuit, without a jury. The action was brought to recover the amount of certain assessments upon shares of the capital stock of the plaintiff, alleged to be held by the defendant. H. O. Lakin, attorney, for the appellant; R. P. Marvin, of counsel. Bass, Cleveland & Bissell, for the respondent. SMITH, J.: The principal question in the case is whether the defendant made such a subscription for stock as constituted him a stockholder in the plaintiff corporation, and liable to be assessed. The plaintiff was organized as a railroad corporation, under the provisions of the statute of 1850, known as the general railroad act. (L. 1850, ch. 140.) The date of its organization was March 23, 1872. A few days prior to the organization of the company, the defendant, with several other persons, signed an agreement in writing, by which the several subscribers thereto agreed to take and pay for the number of shares of the capital stock of said company, of $100 each, set opposite their respective names. The agreement was in the following words: "We, the undersigned, in consideration of, and for the purpose of becoming stockholders in the Buffalo and Jamestown Railroad Company, do hereby subscribe and take the number of shares of one hundred dollars each share, of the capital stock of said company, set opposite our respective names, and agree to pay therefor in such time or manner as required by said company." The defendant set opposite his name ten shares. The trial judge found that the plaintiff, after its organization, accepted the subscription of the defendant, made as aforesaid, as and for a FOURTH DEPARTMENT, OCTOBER TERM, 1880. subscription to its capital stock, and the defendant was required by it to pay, and did pay accordingly, to the directors thereof ten per cent. on the amount so subscribed by him, as aforesaid, in money. Upon the facts and findings above stated, the defendant was held liable. The contention on the part of the defendant is, that he is not liable, inasmuch as his subscription was not made in either of the mode; pointed out by the act of 1850, that is to say, by signing the articles of association that were filed with the Secretary of State, or by subscribing in the books opened by the directors after the company was organized. We do not think the position is sound. According to the provisions of section 1 of the act of 1850, the persons who have subscribed the articles of association filed, and all persons who shall become stockholders, shall compose the corporation. No particular mode of becoming a stockholder is pointed out in section 1. Section 4 provides that subscription books may be opened by the directors, for the purpose of receiving subscriptions, but there is no language in any part of the act indicating that such mode of subscription is intended to be exclusive. It is not provided that a subscription shall be void unless made in such books. The payment of ten per cent. undoubtedly is a prerequisite to a valid subscription, the language of the statute being that "no subscription shall be received or taken without such payment." If it had been provided that no subscription should be received unless made in the books opened by the directors, there would have been some warrant for the defendant's position, but that the legislature has not said, and the courts cannot interpolate it by construction. The appellant's counsel argues that the whole proceeding is statutory, and that, in order to be valid, it must be had in the way pointed out in the statute. That, we conceive, is true in part only. The statute is the grant of power to create the corporation, and in creating it the statute must be followed strictly; but the corporation. being formed, the taking of shares of its capital stock is a matter regulated by the general law of contracts, except so far as the statute has provided otherwise, expressly or by necessary implication. Doubtless it would be convenient and useful to have all subscriptions entered in a book under the charge of the directors, for many FOURTH DEPARTMENT, OCTOBER TERM, 1880. purposes connected with the affairs of the corporation, such as the distribution of stock, making assessments thereon, and enforcing the individual liability of stockholders; and probably considerations of this nature led to the provisions of section 4, referred to; but as between a subscriber and the corporation, it is not essential that his subscription, otherwise valid, should be made in such book. We think it would be putting a forced and unwarranted construction upon the language of section 4, to hold, in the absence of negative or restrictive words, that it was intended to confine the making of a valid subscription for stock to the mode there pointed out. This conclusion does not conflict with any adjudication to which our attention has been called. The learned counsel for the appellant cited and relied upon the cases of Erie & N. Y. City R. R. Co. v. Owen (32 Barb., 616), and Troy & Boston R. R. Co. v. Tibbitts (18 Id., 297.) Those cases are not in point. In Owen's case, duplicate sets of articles of association, pursuant to the general railroad act of 1850, were circulated for subscription before the corporation was formed, one of which was subsequently filed in the office of the secretary of state, as required by the first section of the act, and the other was not filed. The defendant was sought to be made liable upon his subscription to the latter, and it was held that he was not liable. There was no question in the case as to the requisites of a valid subscription under section 4, after the corporation had been organized, and what was said on that subject, although entitled to the respect due to the opinion of a learned and experienced judge, was obiter dictum. Nor is there any analogy between the two cases, so far as the particnlar question under consideration is concerned. In Owen's case there was no room for construction, the language of the first section, under which alone the case was decided, being explicit, that "the persons who have so subscribed such articles of association," that is, the articles filed with and indorsed and recorded by the secretary of state, "and all persons who shall become stockholders in such company, shall be a corporation," &c. The defendant, not having signed the articles filed, and not having become a stockholder by means of anything done before or after the corporation had an existence, was properly FOURTH DEPARTMENT, OCTOBER TERM, 1880. held not to be a member of the corporation. The case of Tibbitts, which was cited in Owen's case, arose under the general railroad act of 1848. Tibbitts was sought to be made liable as a stockholder in a corporation formed under that act, by reason of his having subscribed a preliminary paper, previous to the organization of the company, by which he agreed to take the amount in capital stock, placed opposite his name, without subsequently affixing his signature to the articles of association, or subscribing to the capital stock in the books opened by the directors or elsewhere. The act of 1848 contained substantially the same provisions as that of 1850, in respect to what persons should constitute the corporation, and as to the manner of subscribing for stock after the corporation was formed. It was held that the preliminary subscription was a mere provisional act, and had no legal vitality standing alone, and that the defendant was not liable. In that case, also, the question as to what was necessary to constitute a person a stockholder after the formation of the company did not arise. In neither of those cases was there any evidence of an acceptance by the corporation or of a ratification by the defendant of his subscription after the corporation was created. Mr. Justice WRIGHT, who delivered the opinion in the Tibbitts case, adverted to that circumstance as distinguishing the case from that of Hamilton & Deansville Plank Road Co. v. Rice (7 Barb., 157), where the defendant followed up his subscription, made before the company was created, by an acceptance of a certificate for the stock, and on that ground was held to be a member of the corporation. The cases cited by the appellant's counsel are inapplicable to the present case. Assuming that the defendant's agreement was not invalid because it was made in a book other than those opened by the directors, the question arises whether it was void for the reason that it was made before the corporation came into existence. There must be a promisee as well as a promisor to constitute a valid contract. As respects this point, the plaintiff's case, in our opinion, steers clear of any difficulty, if, in fact, the defendant's subscription was accepted by the corporation after its organization, and was subsequently ratified by the defendant by his paying assessments thereon of ten per cent. In that case, the subscription may be regarded as |