FEDERAL, BlU'OKTER,' vol.
48.
the PT?perty: arid: assets of"said Hugnley ManufacturingGompany. He is,inter'eSted' as trustee of sa,id 'bondholders." 'l'?e is the sale qn9er the decree of t4e!l)4te court, be" is true, that the vroperty wassoM under the decree of the state, court, subject to this , trust-deed,itnewrtheless, We think"appears from the foregoing allegations that Huguley's interest is adverse to that of the bondholders, and CpI;lSElqUently to show his incapacity ,as a party cou1p!ainant. It might have been allegl;ld with ,wP:r:e definiteness, but, conceding the to be true, as, t,l;le demunrerdoes, we think,hi&adverse inter8,\:1;:fficiently appears. It ma)t "be mentioned that ,thE;l trust-deed is signed, :by W. T. and secretary of the Alabama & Geor¢a Manufacturing Qompany, 130; that it would seem that his interest hl1llbeen adverse to that of tile trust created by, the deed from the beginning. We think' the, be overruled upon all the grQll,uds ordered.
CENTRAL TRUST eo. OF NEw YoR'Je (Oircuit' OoItPORATJONS STOCB:XotD ERS. ."
11.
MA.RIETTA &N. G. R. Co.
N. D.(Je01'(/fa;, July 5, 189L) " Oll' MORTGAGB .:... 'INTERVENTION BY , ,
: 1n'/I; to foreclose a raif1roatimort!raglil,certaln pe"'On8: to be made parties defendant, allegiplJ: that the del/:lndant company wasma.de ;up by an illegal consolidation of three other companieili'inone of which they werestockbolders' that thElY never consel)ttjd, or recogni,,/ld the validity of, th!l: cpnsolidation, and were not bound by it or by the act of the new company creatingtlIjl mortgage; that ih,e, b,:e,W,', co,mp,an y "i. pelh'al'Sconclu,dM'b1 its, conduct in, the pr,emises from making to the suIt; the origilWol company, of which they were members, hadQQoft!..cer, or upon whom they could caU t.o make, defense for thenl.;atldtbat the counsel fl)r:,the cODlib'11dated companydeclilled to set up the defensewhioh they, Held, that tblllle facts gave no right to intervene as dElfllndal\ts, especially as there WWiI no charge of fraud or collusion, and the proper remedy is, by an 'independent suito·
In Equity. Bill:tQ foreclose railroadrnortgage. On petition of inter.. vention; Butler, Stillmrin& Hubbl'lrd and H. B. Tompkins, for complainant. Abbott'& 8mlith and O. 'D. 'Phillips,' for ,respondent. ' NEWMAN, ,J.-The above-named caS!! If! a suit in equity, brought by complainant, as the, trustee for oertain holders of bonds of the defend&rtt' COl'poratiot1,to'foreclose the mortgage made to secure 8uch bonds. On this billa receiver has, been appOitltedby the court, arid the usual in:tci'fefence with him allowed., 'The receiver is in oharge of and:is operating,the same by order of the court. D.PliUIips 'and others application' tCi tliecourt for per;' mission to be made partiesdefenoant in'said case, and with leave thereafter'tti pleltlf()r'answer tif!J!uch defendants.,' The peti'tionis as follows:-
CENTRAL TRUST CO, OF NEW YORKtI·.MARIET'tA & N. G. R. CO.
16
( .'''C. D. Phillips,·.
Mltddox, N.S. Eaves, and Henry Wills,. who aver themselves to be citizens of, the state of Georgia. residing within the said northern district of Georgia,. bring this thair:petltion,' and show to the court 8S follows:: Each of them is a stockholder inthe Marietta & North Georgia Railroad Company, hereinafter called the · Railroad Company,' in the amount of $9.475, and petitioners were such stockholders at the time of the lmng of the bil1:inthe above-stated .cause, and at the time the sev:eral acts complained of hereinafter .took place.T.hesaid Railroad Companyw8s incorporated by 8Ct of the general assembly of the state of Georgia, approved on the - - - ' daY! of -',--,-, 1885. and the: several acts amendatory thereof, passed prior to therear 1874. Said company was authorized to build, equip, and operate a railroadfrol'll the city of' Marietta, in the county of Cobb, on thruugh CherOoo Jtee.Fickens,Gilmex,.andFannin, to the North Carolina Hne. On the 14th (If Apl'jl, 11:187, a meeting' of· the stockholders of said· Railroad pears to have been held in the city of Marietta, Ga... at;which meeting all of the stock WItS not represented, but simply a majurity was represented in person or-by proxy. At 'StUd.' meeting the pl'esidentand secretary of the com.. pany were instructed to prepRreand execute articles of consolidation between .the said Ral1road Com pany and the Georgia &; NorthCRrolina Railroad l>any,.a corporation of the state·of North·carolina.This meeting adjourned on the fourth Saturday of thetben present month of April, IH87; In. pUl'$uance thereof; the said stockbol4ers met on the 28d of April, .ThewhQle Dumber of shares represented"iaLperson' ·and by proxy a:ppears'to ,bavebeen 0\'e1'39,000,; total nurnberof,shares55,'i17. Pellitioners had no natice o.f ,etther of these meetillgs, and tbeyhavenot consel1ted to said. meetl nga, nor to,thepr.oceedings hadtbereat. ' Pe'ltidners allege that the proceedings I)f. these meetings were voidfor.want of notice. 'fhe proceedings of the meetings looking to' a,consolfdatiou of said companies were likewise void for wantaf power in said Railroad Company, to pass the samewitbout the COilsent of petitioners. It appears that the said stockholders' meeting adjourned again to meet on the 13th of May; 1887. At said last.named meeting a res" olution appears to bavebeen passed, reciting that two railroad companies had Qgreed ,to consolidate on" certain, terms. ,Among other things, it is recited that, the railroads of the said two railroad companies are to nected together; and form a continuous 'line from Marietta, thl"Ough Murphy, North Carolina, to some point in North Carolina on the Tennessee Iina;l\nd that eacb of said companies is,desirous of consolidatinKits capital stock, arty, and franchises with the capital stock and franchises of the other railroad company, so as to form a raUroRd corporation which shall embrace all of the capitalstock.·property, andArancbises, and have all the power, rights; and pl'jvileges, of tb,e said two.railroad companies;' that the name and'style of the new company. shall be the Marietta &\ North Georgia Hailway Company; of bot-beom· and all-l\heproperty, dghts, ,interests, franchises, and. panies shall.be vested in the consolidated company"AI80 provides that the capital stock of the consolidated company: shall be 1.300,000 dollars. It peal's, also, that in order to prOVide means with which to broaden tbegauge of the road, and for further construction,und to retire the bonds already sued, etc., the consolidated company should issue its first mortgage bonds, covering aU the property and franchises, to -the extent of 16.000 dollars per mile; on that portion of the road from Marietta, Ga.· to Murphy,N. C,; and 2O,OOOdoUars per mile 011 that part from Murphy,N. C., to Knoxville, Tenn., and to secure the same by a first mortgage on all the property of the company then owned Your petitioners allege ,that saidllgreement of consolidatiun was void, because said Railroad Company had Il() power to enter intotbesame withont of petitfoners; llndthe said' for tqe,i"uancl) ot. 1)Qndll ADd the ,securing of ;thesame. 8S
DDERAL REPORTER, vol.
alleged, was likewise void for the want of power in said company to pass the same. Petitioners have in no wise ratified said action of said stockholders. Even if it should be contended that said consolidation was had in pursuance of authority of law, these petitioners submit that the same was done in pursuance of lIin amendment of the charter, which materially and fundamentally changes the purposes, aims, and objects sought to be attained by petitioners in their subscription to the capital stock of said Railroad Company, and the same void as to them. It appears, also, that one of the purposes for which the money to be raised by tbe sale of said bonds was to provide means to extend the road from· Murphy, N. C., to Knoxville, Tenn. Petitioners allege thatit was and is illegal without their consent to incumber the property of the company in .which they are .stockholders, to provide meanS for the build.. ing of 8 road ill Tennessee,:and they allege that said bonds and said mortgage, in so far tlS they were executed with a view to create tl lien on the property of said Railroad Company for the purpose of building said! Knoxville extension, the same are illegal.nuIl, and void as to these petitioners, and other stockholders standing in the same situation with them. These petitioners charge thattheplaintitl' in this case had knowledge of the want of power in said defendant company to take said mortgage and issue said bonds at the time it accepted the trust, .or, :iflthad .not .actual notice, it took said deed of trust and said, bonds under circumstances as to charge it with notice. These petitiouersbave never in anyway recognized 'the validity of said attempted consolidation, have tbey in any way ratified the action of said defendant corn pany in the issue ·of said bonds and the execution of said mortgage. Your petitioners further show that said defendant company, in still further violation of the rights of your petitioners, did. on the 25th of November, 1890. attempt to consolidate Its property, rights, franchises, and privileges with a corporation known as the 'Knoxville Southern RailroallCompany,' which Is said to be a corporation under the laws of Tennessee·. By this attempted union and consolidation all the property, assets. franchises. and privileges of each of said companies w8svested in the defendant railway company. This action was had at what appears to ha¥6 beeu a called meeting for that purpose, of which these petitioners bad no notice,and to which they have never in· any wise consented. The board of directors appear to have ratified the action of the stockholders. This last union and attempted consolidation purports to have wrought some radical change in the charter of said constituent companies. Among other changes, the capttalstock is increased to 5,500,000 dollars. The principal office·Js removed from Marietta, Ga., to Knoxville, Tenn. Petitioners allege that said attempted consolidation is void as against them, because they have never consented to it nor ratified it, and they charge that it is void as to everybody, because the said defendant did not have the power to enter into saidconsolidatioll. The said Railroad Company, defendant in said cause, is perhaps concluded by its conduct in the premises from making defense to the plaintiff's cause, and from setting up the defense of petitioners herein set forth. The said Marietta & North Georgia Railroad CQmpanyis a. party to the 'cause, and it has no officers or agents, nor other representative, upon whom petitioners can call to enter a defense for them in this cause. The said defendant company declines, through its counsel of record in the caUse, to file a defense, and setup the invalidity of said various Mt8,set forth herein. Petitioners now come,aud move an order admitting them as, defendants to the cause, with leave to plead or answer thereto, by . way of defense, the facts herein set forth, and such other. additional facts as may appear as again,st the light of the plaintiff to the relief sought." " .
.
It will be perceived that these petitioners claim that they were stockholders in the Marietta & North Georgia Hailroad Company, which was
CENTRAL TRUST CO. OF NEW YORK V. MARIETTA & N. G. R.
co.
17
in 1887 consolidated with the Georgia & North Carolina Railroad Company, and subsequently, in the year 1890, with the Knoxville Southern Railroad Company, the entire line now being known as the Marietta & North Georgia Railway Company. Without passing in any way upon the merits of the application, the petition is considered now solely upon the right of petitioners to be parties defendant, and to appear as such by plea or answer. As a general rule, a corporation can only appear to defend .litigation against it in its corporate capacity, and represented by its properly constituted officers. The exception to the rule may be stated in the language of the supreme court in the case of Bronson v. Railroad Co., 2 Wall. 283: "In a special case. however, where there is an allegation that the directors fraudulently refused to attend to the interests of the corporation, the court of equIty will, ·in its discretion, allow a stockholder to become a party defendant for the purpose of protecting, from and illegal claims against the company, liis own interest,and the interest of such other stockholders as may choose ,to join him in the defense." "by Justice BRADLEY in the case of Forbes v. Railroad 00., 2 Woods f 323, in the following language: ·'To be allowed to intervene as general defendants and contestants is another and different thing. Thiscan beadinitted only upon the ground b.efore referred to, to-wit, haVing an interest in tQe results as a stockholder or otherwise,and being able to show fraud and collusion between the plaintiffs in the suit aM the officers of the company haVing charge of its interests. A suggestion In the progress of the suit that an officer of the courL is disposed to act fraudUlent, or that the court has made an injudicious or erroneous order, will not be sufficient ground to allow such a party to intervene. Indeed, it is questionable whether in any. Case, where a suit is properly Instituted against a corporation. a stockholder of that corporation can, even on a suggestion of fraud .on the part of itsotficers, come in by way of intervel)tion as party to that SUit, and seek to defend or control the proceedings. An original bill . would rather seem to be a proper mode of proceeding." In the caae of Blackman v. Railroad, etc., Co., 58 Ga. 189, the supreme court of Georgia, in disposing of a case brought before it for review, where the application was like the one now presented to this court, and it had bl'len denied by the court below, delivered this brief opinion: "Except in cases generally provided for by the Code, {section 3374,) stockholders can.llot plead 01' defend for the cOl'poration. That the action is. groundless and collusive, and that, for motives of fraud or favor on the part of the officers, the corporation fails or refnses to defend, wiU make no difference. The stockholders may protect all their rIghts by instituting a proper action of their own. In conducting suits due regard must be had to the distinction between parties and those who are not parties. A corporation is a separate person from any or all the stockholders. When it is sued alone, they are not before the court; and they cannot interpose in that suit without express statutory authority. In eqUity, or possibly at law, under our peculiar jul'isprudence, they can take measures, by an original pl'o'leeding in their own behalf, to prevent the appropriation of corporate assets to fraudulent claims, though such claims have been fraudulently, by the connivance of the corporation or Its officers, reduced to jndgment. 'fhe present case does not fall within the terms of section 3374 of the Code, since the judgment Is not
18
.:i
FEDERAL'. REPORTER,VO'1.
from 'the'
to bind tha Individual property oftbli stockbolders; and no aId can bederlved i1$72, tbesamep6jng
It is'notI claimed in the this court that there fraudulentconduot on the;part of the officers'oT the Marihas been etta & North Georgia Railway Company in reference to ;the,suit of the ,Denhnl Trust CompanY;l1Oris it alleged that there is any fraud or col-lusion bet'Yeedthecomplainantsandthe eorporation, or its ·o·fficers and representatives, ,but only that,the "defendant in said case is perhaps concluded by its conduct inethe,premise9l(rom making defense to the plain'tiff's oause, and, from setting up thei defense of petitioners herein set forth;" and that "the Railroad Company, in which these petitioners claim. to be lltocllbPlders, officer.Dor representative upon whom the petitioners can call to enter a defense for them," and that "the counRailrM!d CompaDY' 'declines; to set tip the defense 'whIch these{'peittioners The suit to, peticorporation, . tioners the Railroad Company. Assuming that' the effect 0'( the Consolidation ilill the new cOfporntion, 'arid' that 'was' to the officers of the Railroad Company artr:their'representatives,' and that it is incumbem.lipon them to properly represent theinterest of these petitioners, ·no';sucll.bad faith on, the part,oNhe corporation or its officei'S justifythetiourt,: under what be the 'ni,zed as file deto thIS,; any . l'lghts, ·they may can otherWisCt··. stOQkhplder& in the oldcoTporation, Nrhich they allege has not been Jegallyeonsolidated'witbor merged into the new corporation, the' argument againsttheir coming into thislitiga.; tion would be even stronger' than if theyhad been stockholders in the s,uch pre"ious conditions! Jiadexistedor changes occurred: ' As to a:hy wpich they stockholders, asserted to be connected with and to the property which is the subject-matter of the'suit,aridiil' the hands of the receiveroHhis court, they are not remediless; and they should in a proper proceeding be heard, of course. But their prayer to bernacle parties defendant cannot bEl granWd. This application must be deniijd, without'prtljudice, however, proper proceeding ·for the to ,the rights of the petitioners assertion and llscertaintnent-of any rights they may have in connection with the property in the hands of,the ootirt and embraced in the suit.. , 'i " " 'j' , I
:'
1-'
<
:
GLENN tI. PRIES':.
19
SAME 11. DORSHEllfER. (CfJrcuft Coure.,E. D. MUBO'lIIIi, E. D. October 7,1891.)
Y. I.
BvmENCB OJ!' FORHBBJUDGMENT-PLUDING-GENBRAL DENIAL.
Under the Missouri Code of Procedure a former judgment of the court lauot. admissible lin evidence under a general denial, but must be specially pleaded. called for. nntil a call is made.
LnuTATION OJ!' ACTIONS-RuNNING OJ!' STATUTE-CALLS POR STOCK SUBSCRIP'1'l:Ol'lS.
Limitli.tlon does not run as against sub8Oriptions of capital stock, payable when
8.
CoRPOltATION8-SunsORIBBR8 )'OR STOCK-LIABILITY J'OR CALLS-ASSIGlOIBlIl'l'O),
STocK. . .Under tbe laws of Virginia. a llubscrlber for the stock of. the NatlonalBxpress & Company is liable for the full par value thereof wtlen called for by the comp8Dl, although he has prevloual1 made a bona &8Ilignment of hia shares.
In Equity. Suit to reClover the second8flsessment npon the stock of the National Express & Transportation Company. As to the suits for the first assessment, see 23 Fed.. Rep. 695, and 24 Fed.·Rep·.536. Oil motion for new trial. For prior report, see 47 Fed. Rep. 472. Overruled. rrhomaa K. Skinker, for plaintiff. W. H. Clopilm, for defendants. THAYER, J. Two questions are presented by the motions t'or new trial whiCfh have been.fUed in .. In the case against Priest as executor of Taylor it.· is insisted that the judgment rendered by this court on March 12, 1884, in the suit to' recover the first assessment on stock, should have .heen admitted in evidence as a bar to the suit .on the second assessment, although it was not specially pleltded.I an examination of the authorities cited, that the positaken is untenable. Before the adoption of the Code of Procedure it was the practice in this state, as well as in many other jurisdictions, to permit a judgment to be given in evidence under the general issue, (Offutt v. John, 8 Mo. 120;) but at the presp-nt time, and since the adoption of the Code, the better orinion is that a judgment cannot be given in evidence, either to support the defense of former recovery or to show that fl given question arising)n a suit has been adjudicated in aprevious suit. between the parties, without being sppcially pleaded. The dif· ference the general.issue at common law and a general denial under the()oJe is well marked, and has been frequently noted. Bliss, Code flo §§ 323, 324. The general. issue was sometimes regarded as tantamount .toa denial of all liability ,and under that plea almost any matter co:uld be given in evidence which to show that the defendant ",as not .iable. On the other hand, the office of a general denial under is merely to put in issue material allegations of fact contained in the petition or complaint, and under tpe latter plea only such matters can be given in evidence as tend to disprove "facts in the complaiI/t. . N&rthrwp v. IrtBUranee 00., 47 Mo. 435; MU88er'1. Adler,86 Mo. ijdhecase last cited 'the court say: " , ·. ,'; .,; J ,',.' ".,' ,
;,.'",'....