text:
    Phillips, Appellant, v. Pilling.

      Contract — Sale—Coal—Shortage of cars.

    ■Where a contract for the sale of coal from a designated mine provides that “if there should be a shortage of cars shipment will be divided from time to time in fair proportion on all orders,” the “shortage of cars” means a shortage of car supply at the mine from which the coal is produced.
    Argued March 26, 1906.
    Appeal, No. 53, Jan. T., 1906, by plaintiff, from judgment of O. P. No. 2, Phila. Co., March T., 1903, No. 4,078, on verdict for defendants in case of Charles S. Phillips, Henry H. Ashley and Charles P. Hunt, copartners, trading as Parrish, Phillips & Co., v. William S. Pilling and Theron I. Crane, copartners, trading as Pilling & Crane.
    Before Mitchell, C. J., Fell, Potter, Elkin and Stewart, JJ.
    Affirmed.
    Assumpsit for breach of a contract for the sale of coal. Before Sulzberger, J.
    The facts are stated in the opinion of the Supreme Court.
    The plaintiff presented the following points :
    1. It was the duty of the defendants to purchase or acquire coal of the kind agreed upon and deliver the same to the plaintiffs from the market or from any source from which they could have acquired the same, and which was known to them, or, with due diligence, might have become known, and they would not be excused from the delivery of the coal merely because the single seller with whom they made a contract failed to deliver the coal to them which they had purchased for the purpose of filing the contract in suit. Answer: The principles, some of which are quite correct, stated herein, are in such complicated relations and require so much qualification, that I think I prefer to stand by the announcement of the legal principles, and the relations of the facts to them, that have been given in my general charge, and I decline to affirm this point as put. [1]
    2. The shortage of cars which, under the terms of the contract would excuse the defendants from making deliveries except proportionally from time to time on all cars, means an inability of tbe defendants to obtain car-loads of coal of the kind agreed upon for delivery to the plaintiffs in the open market, and the mere fact that the defendants were unable to obtain the delivery to them of sufficient cars of coal to fill the contract with the plaintiffs under the contract or arrangement under which they expected to receive them, is not sufficient to justify the failure of the defendants to deliver the coal at the rate called for by the contract of 2,000 tons per month. Answer: For the same reason, I decline to affirm the second point. [2]
    Defendant presented these points:
    1. The contract between the plaintiffs and the defendants expressly provided that if there should be a shortage of cars during the period fixed for delivery, shipments should be divided from time to time in fair proportion on all orders. If, therefore, you find that there was such shortage of cars, and that by reason thereof an insufficient quantity of the kind of coal to which under their contract plaintiffs were entitled, was obtainable by defendants, delivered f. o. b. cars at South Am-boy, then they were only obliged to deliver to plaintiffs such quantity of such coal so delivered, as was the fair proportion of the plaintiffs, upon all defendants’ orders for such coal. In determining what was such fair proportion, you will take into consideration all orders for the kind of coal which, before the happening of the shortage and in ignorance that there would be any such shortage, they had bound themselves to fill, and which but for such shortage they could have filled. Answer : I affirm that point. [3]
    2. In determining the total quantity of coal of the kind which plaintiffs bought, which, f. o. b. cars at South Amboy, was shipped to defendants, you will not include any of the kind of coal for which transportation could only be secured in cars of railroad companies, other than the Pennsylvania Railroad Company, which the latter would not transport to South Amboy. Answer: I affirm that point. [4]
    3. If you find that to meet the pressing demands of the plaintiffs for coal, bituminous coal was delivered to them from time to time, to a greater extent than their proportion of the kind of coal, which they bought, then the defendants had a right, when the kind of coal that they bought arrived at South Amboy, to convert the same to their own use, to the extent of the excess coal theretofore delivered under such demand, if any, to the plaintiffs. Answer : I have, in general terms, stated that substantially. I affirm this point. [6]
    8. There was no guarantee by the defendants to the plaintiffs that the former would receive the full quantity of coal purchased. There was an exemption of liability for any failure in deliveries, prevented by interruptions of transportation, shortage of cars, or any cause or occurrence beyond defendants’ control, provided that if the delay was because of a shortage of cars, shipments should be divided, from time to time, by the defendants in fair proportion on all orders. Answer : I affirm that point. [6]
    9. Whether the contract was for Nonpareil or for Sonman Shaft coal, if you find Nonpareil coal designated a coal mined only at the Nant-y-Glo mine, and that Sonman Shaft coal designated a coal mined only at the Sonman Shaft mine; and if you find that before entering into their contract with the plaintiffs, the defendants had secured a supply of Nonpareil or of Sonman Shaft coal, to be delivered at the times stipulated for with plaintiffs, amply sufficient as to quantity, to fill the order of the plaintiffs, and all other orders accepted by the defendants; and if you find that they would have received such supply and could have filled the contract with the plaintiffs, saving for the fact that there was a shortage of cars, interruption of transportation, or a cause or occurrence beyond the defendants’ control which prevented, then I instruct you that it was the duty of the defendants to deliver to the plaintiffs only a fair proportion,
    apportioned amongst all such orders, of the coal which they, from time to time, received, of the kind designated. If they did furnish such proportion, they are not liable in damages. If they failed, they are only liable to the extent of the deficiency in the failure to deliver the proper proportion calculated on all such orders. It was not the duty of the defendants to deliver any other kind of coal than that stipulated for. Answer: I affirm that point. [7]
    10. If prevented from delivering coal of the kind stipulated for by any of the causes above specified, and if coal, because of any such causes, had risen in price in the market, it is not the duty of the defendants to go out into the market and to purchase such other coal at such prices, enhanced by reason of said causes. Answer: Subject to the limitations in my general charge, as to the effect in case this was a general contract for bituminous coal, I affirm that point. [8]
    April 30, 1906:
    Certificate and judgment for defendants for $1,222.14. Plaintiffs appealed.

      Error assigned were (1-8) above instructions, quoting them.

      H B. Grill, with him John B. Bead, Silas W. Pettit and Louis B. Bunk, for appellant.
    Under the contract between the Sonman Shaft Company and the Keystone Company it was clearly the duty of the Keystone Company to furnish the ears and have them at the mines for the Sonman Shaft Coal Company to load, and the Sonman Shaft Coal Company was not obliged to furnish the cars: Hocking v. Hamilton, 158 Pa. 107; Haff v. Pilling, 134 Fed. Repr. 294.

      John Gr. Johnson, with him Henry P. Brown, for appellees.
   Opinion by

Mr. Justice Elkin,

The question raised by this appeal must be determined by a proper construction of the contract entered into between the parlies. It is in writing, and provides for the sale and delivery of 14,000 gross tons of coal of a particular kind therein specified at a particular place therein named. The railroad scale weights at point of shipment were to govern the settlement of accounts between the contracting parties. The coal was to be delivered in cars on the piers of the Pennsylvania Railroad Company at South Amboy. The contract itself named Nonpareil bituminous coal, but it was shown at the trial, and conceded here, that the use of this term was a mistake, Sonman shaft coal being intended. We must therefore accept this as an established fact in the consideration of the case. It is further provided in the contract that the seller will not be responsible for delay in deliveries if prevented by strikes, combinations of miners, accidents in the mines, interruptions of transportation, or other causes therein mentioned. These specific matters need not be considered because appellees do not attempt to excuse their nonperformance of the entire contract on account of the conditions herein above stated. They do set up the following covenant as a justification of their failure to make full deliveries, to wit: “ It is understood and agreed that if there should be a shortage of cars, shipment will be divided from time to time in fair proportion on all orders.” The evidence clearly shows that there was a shortage of cars during the period covered by the contract by reason of which appellees fell several thousand tons short in making the required shipments. This suit was instituted to recover for breach of the contract. The court below held that the contract referred to a particular kind of coal at a designated mine, and that the clause relating to car supply meant a shortage of cars at the mine from which the coal was produced. The correctness or incorrectness of this ruling is the pivotal point in the case.

Appellants contend that it was the duty of appellees to deliver them 14,000 gross tons of coal of the same general quality as that named in the contract, and that it made no difference whether it was Clearfield coal, or Sonman Shaft coal, or Son-man coal, or any other coal of a similar character. We cannot accept this contention as sound, because it is otherwise written in the contract. The vendors sold and the vendees bought Sornnan Shaft coal. This coal is only mined at one place, and by one company. It was to be weighed on the railroad scales at the mines. It was to be transported by the Pennsylvania Railroad Company and delivered to consignees on the railroad piers at South Amboy. The contract is not susceptible of any other interpretation. It was a proper contract to make. It is customary as between the buyer and seller of coal to designate the particular kind to be delivered. Bituminous coal varies in quality even in the mines on adjoining properties. The constituent elements upon which the quality of coal depends are fixed carbon, volatile matter, sulphur, ash and phosphorus. The proportions in which these elements are found in a seam of coal determine its value for the use intended. Some coal is high in fixed carbon and volatile matter, and low in sulphur, ash and phosphorus. In other seams these conditions may be reversed, and in no two mines are they exactly the same. For these reasons some coal is adapted to the making of coke, some for steam, some for foundry use, and some for manufacturing purposes generally. The buyer has these conditions in mind when he makes his contract for future supply. Nature did not fix these proportions with any degree of uniformity. It is safe to assume that in no two mines in the bituminous district of our state do the analyses show the proportions of the constituent elements to be exactly the same. The purchaser in making a contract has in mind two things, the use for which the coal is intended and the quality adapted to that use. He makes his contract upon this basis, and has a right to insist upon the performance of the covenant relating thereto. It is to be assumed that appellants had a customer familiar with the quality of Sonman Shaft coal which was suited to his purpose, and that the contract was entered into with this understanding. It will not do to say that the purpose of the contract can be defeated in furnishing any quality of coal when a particular kind is designated. If the seller in this case had undertaken to deliver Tearing Run, or Bear Run, or Clearfield coal, the buyer could have refused to accept it because it was not a performance of the covenant to furnish the particular kind of coal specified in the contract. The rule should wmrk both ways. The whole question was submitted to the jury in a careful and well-considered charge by the learned court below, with instructions that if the testimony satisfied them that the shortage of cars prevented appellees from completing full deliveries, and that a fair proportion of the coal mined had been furnished appellants, there could be no recovery. The jury found these facts in favor of appellees, and we see no reason to disturb their finding.

Assignments of error overruled and judgment affirmed.


source: Caselaw Access Project

author: Mr. Justice Elkin,

license: Public Domain

text:
    Rose v. Independent Chevra Kadisho, Appellant.

      Practice, C. P. — Affidavit of defense — Building contract — Conditional acceptance of a building.

    In an action to recover a balance alleged to be due on a building contract, an affidavit of defense is sufficient which alleges that the work had not been completed according to the terms of a conditional acceptance of the same.

      Corporations — Minutes—Evidence.
    The minutes of a corporation are prima facie evidence of the facts therein stated, but parol testimony is admissible to explain or supplement them.

      Argued March 26, 1906.
    Appeal, No. 74, Jan. T., 1906, by defendant, from order of C. P. No. 1, Phila. Co., Sept. T., 1905, No. 516, making absolute rule for judgment for want of a sufficient affidavit of defense in case of Jacob Rose and Maurice Rose, trading as J. Rose & Son, v. The Independent Chevra Kadisho of Philadelphia.
    Before Mitchell, C. J., Fell, Potter, Elkln and Stewart, JJ.
    Reversed.
    Assumpsit to recover a balance alleged to be due on a building contract.
    The affidavit of defense was as follows :
    Jacob Schwartz, being duly sworn, deposes and says, 'that he is the president of the Independant Chevra Kadisho, which is a corporation of the first class, incorporated under the act of 1874, for the purpose of giving free burial to its members and others, and that since its incorporation it has been doing charitable work in that it has given free burial to persons whether members or nonmembers, who have died in want and whose families are unable to furnish or pay the expenses necessary for funeral and interment, and is supported mainly by contributions of the public.
    That it is untrue that any of the changes as made by the contractors in the building of said mortuary, stable and privies were done upon the special instance and request of the defendant, or its duly authorized committees, except as appears by the contract of October 24, attached to plaintiffs’ statement of claim but all these changes were made by the plaintiffs for their own benefit and convenience, and in direct opposition to the express order and requests of the building committee, and a large number of these changes are detrimental to the interest of the defendant, and likely to cause it serious loss, and will have to be remedied so as to comply with the plans.
    -* * * * -*• * * *
    That as a result of these deficiencies and of the unwarranted changes made by the plaintiffs on the plans and specifications, the defendant has been damaged to an amount far in excess of the amount of the plaintiffs’ claim. That in the opinion of experts who have examined the building it would cost upwards of $4,000 to make the necessary changes to put this building in a condition as required by the plans and specifications attachcd to plaintiffs’ statement of claim ; so that instead of there being due to the plaintiffs from the defendant $8,249.10 as claimed by the plaintiffs, there is actually due to the defendant from the plaintiffs the sum of $750.90.
    That although the contract under which the plaintiffs’ claim provides that before the plaintiff shall be entitled to any payment whatever “ a certificate shall be obtained from the architect, setting forth that the work has been done in a satisfactory manner,” yet the plaintiffs have not obtained, produced or exhibited to the defendant, or any of its officers, or its building committee, a certificate from the architect that the work has been done satisfactorily, with the exception of the certificate upon which the payment was made of the amount for which credit is given.
    That on March 18, 1905, the plaintiffs agreed that all the work “must meet with the approval of the committee and building architect in reference to the whole building structures.”
    That notwithstanding this agreement the work has not met with the approval of the committee on building or of the architect, but on the contrary both the architect and the building committee have disapproved of the work done.
    The contract upon which plaintiffs’ claim, contains the provision that the work shall be done “ within ninety working days from date ” thereof, yet the plaintiffs in the statement of claim set forth that the work was not completed until March 29, 1905. Deponent avers that the work was not completed at that time, and that the plaintiff had workmen on the building as late as June 23, and the ■work is not done yet, as a result of which delay defendant was put to considerable loss.
    That if the plaintiffs used extra materials in and about making the changes from the plans and specifications as they claim in their statement of claim, then they did so at their own risk, and the defendant should not be held responsible therefor ; and as is seen from their contract of March 18, 1905, the plaintiffs were not to make any additional charge for any extra work on the stable, mortuary or water-closets.
    That it is true that the plaintiffs did some extra work for the defendant in and about taking out the partitions and doing the other work on premises 408-10-12 Christian street, for which the plaintiffs in their statement of claim demand $75.55, but deponent avers that at a number of occasions before this suit was brought the plaintiffs agreed, stated and claimed that the total amount due for this work is $50.00, and never made claim for more than that amount until the statement of claim in this matter was filed; but deponent avers that the defendant is not now liable to pay this sum, for there is due to the defendant from the plaintiff a much larger sum of money, as hereinbefore set forth, and the defendant sets off so much thereof as is necessary against this claim of the plaintiffs.
    The deponent admits that the defendant became indebted to the plaintiffs for the sum of $53.15, for the goods as set forth in the copy of the book entries, of plaintiffs’ statement of claim, but the deponent maintains that the defendant is not bound to pay said amount at this time, as the plaintiffs are indebted to the defendant in a far larger sum, as set forth in the foregoing part of this affidavit, and the defendant sets off so much thereof as is necessary against this claim of the plaintiffs, and will at the trial of this cause ask for a certificate against the plaintiffs for the balance due to the defendant.
    That it is untrue that the defendants accepted the work at a meeting of the defendants held on April 12,1905, but on the contrarjr the extract of the defendant’s minutes, as set forth in the plaintiffs’ statement of claim, did not refer to whether the building was properly constructed or met with the approval of- the building committee, but merely that the work was progressing, and that there was nothing special to report, and deponent further positively avers that neither the board of directors, nor the building committee, nor the architect, at that time or at any time has accepted said work or approved of same, but, on the contrary, have complained about the improper construction and condition of the said buildings.
    The court made absolute rule for judgment for want of a sufficient affidavit of defense.

      Error assigned was the order of the court.

      Samuel Englander, for appellant.
    A minute or record of a corporation is not conclusive against it, and parol evidence is admissible to explain, qualify, and even alter and rebut the minute or record: Hamill v. Supreme Council of Royal Arcanum, 152 Pa. 537; Gearhart v. Dixon, 1 Pa. 224; Thompson v. Chase, 2 Grant, 367; Thorne v. Ins. Co., 80 Pa. 15; Carmony v. Hoober, 5 Pa. 305; Parker v. Luffborough, 10 S. & R. 249; Goodwin v. Annuity, etc., Life Ins. Co., 24 Conn. 591; Gilson Quartz Mining Co. v. Gilson, 51 Cal. 341; Heintzelman v. Druid’s Relief Assn., 38 Minn. 138 (36 N. W. Repr. 100); St. Louis, etc., Ry. Co. v. Tiernan, 37 Kans. 606 (15 Pac. Repr. 544).
    April 30, 1906 :
    As the affidavit of defense denies the acceptance of the work and qualifies the minute upon which the plaintiff relies, a question of fact arises which must be submitted to a jury: Knerr v. Bradley, 105 Pa. 190; s. c. 16 W. N. C. 72; 31 Pitts. L. J. 495; Allegheny City v. McGaffrey, 131 Pa. 137; s. c. 25 W. N. C. 213; Delahunty Dyeing Machine Co. v. Penna. Knitting Mills, 19 Pa. Superior Ct. 501; Bryson v. Home for Disabled & Indigent Soldiers, etc., 168 Pa. 352.

      Adolph Mohholz, for appellees.
    Where a building erected under contract is substantially completed, full performance in minor particulars may be dispensed with by the party to whom it is due: Stewart v. McQuaide, 48 Pa. 191; McClelland v. Rush, 150 Pa. 57; Pittsburg Terra-Cotta Lumber Co. v. Sharp, 190 Pa. 256.
    Nowhere does the affidavit of defense show the particularity either in the averment of defects or the amount required to remedy those particular defects that is necessary under the decisions: Berlin Iron Bridge Co. v. Bonta, 180 Pa. 448; Thomas v. O’Donnell, 183 Pa. 145; Killen v. Brown, 6 Pa. Superior Ct. 15 ; Gausler v. Bridges, 13 Pa. Superior Ct. 646; Louchheim v. Becker, 3 W. N. C. 449.
   Opinion by

Mr. Justice Elkin,

This appeal raises the question of the sufficiency of the affidavit of defense filed in the case. The court below held the affidavit to be insufficient, and directed judgment to be entered for plaintiffs. It is argued that the affidavit is vague and indefinite in general, and not specific as to the items of set-off claimed. It is therefore insisted that being defective in these and other respects judgment was properly entered. While it may be conceded that the affidavit is inaptly drawn, it does set up a substantial claim of set-off. This court has said that an affidavit of defense is not to be framed with the technical accuracy of formal pleadings, nor subjected to the severe scrutiny which a fine critical skill may exercise, but it must exhibit all the elements of a substantial defense: Thompson v. Clark, 56 Pa. 33; Kaufman v. Cooper Iron Mining Company, 105 Pa. 537.

The affidavit as a whole comes fairly within this rule. We do not agree that under the facts of the case the defendant can be permitted to prove an entire failure in the performance of the contract on the ground that the work was not done according to the original plans and specifications. The acceptance of the building at the time of dedication was a ratification of the general changes made in the plans and specifications. The affidavit avers, however, that the acceptance of the building at that time was only conditional, and that the contractors agreed to complete the work after that time in a satisfactory manner. Certainly defendant was entitled to prove the truthfulness of this averment, and to show that the matters complained of had not been completed according to the terms of the conditional acceptance.

We cannot accept as sound the contention that the minutes of the corporation are conclusive of the matters therein contained. The rule is that such minutes are prima facie evidence of the facts therein stated, but parol testimony is admissible to explain or supplement them: Hamill v. Supreme Council of Royal Arcanum, 152 Pa. 537. In the present case the minutes relied on are ambiguous, their meaning doubtful, and, as translated, the question can be fairly raised whether an acceptance of the work was intended, or only an expression of opinion as to the progress being made. Under the facts, however, it was a question for the jury.

The defendant is entitled to prove at the trial the items of set-off claimed in the affidavit in so far as they relate to the averment that the work has not been completed according to the conditional acceptance at the- time of dedication.

Judgment reversed and a procedendo awarded.


text:
    Vrooman v. R. P. Vansant Lumber Company.

      Corporations — Capital stock — Subscription—Reduction of subscription— Meetings — Notice—Waiver—Act of April 29, 1874, P. L. 73.
    A corporation organized under the act of 1874, with a capital stock of-$100,000 divided into shares of $100 each, all of which is subscribed at the tifne of the organization, and forty-five per cent of which has been paid, has a right four years after its organization when solvent and without existing creditors, to call in the 1,000 shares part paid stock, cancel the original subscriptions, and issue in lieu thereof 450 full paid shares, the remaining 550 shares to be held by the corporation for its use and future disposition.
    The meeting for the reduction of such subscription need not be held in the manner provided by the statute for a reduction of the capital stock, inasmuch as a reduction of the subscriptions is an entirely different matter from the reduction of capital stock. If the meeting is attended by all of the stockholders, except one, and such stockholder subsequently surrenders his part paid stock, and accepts a less amount of full paid stock in exchange therefor, the validity of such meeting cannot be attacked by a creditor whose debt against the company was created several years after the meef.ing; nor in such a case can subsequent creditors of the corporation maintain actions against the shareholders individually for the corporate debts, merely because the corporation failed to file annual reports in the office of the recorder of deeds as required by clause 8 of section 39 of the act of April 29, 1874; and this is especially so where such creditors had actual notice of the reduction of the subscriptions.
    Argued March 27, 1906.
    Appeal, No. 73, Jan. T., 1905, by-Francis Slmbert, from decree of C. P. No. 4, Phila. Co., Dec. Term, 1903, No. 3,026, on bill in equity in case of Samuel B. Vrooman and John C. Cottingham v. The R. P. Vansant Lumber Co.
    Before Mitchell, C. J., Fell, Pottek, Elkin and Stewabt, JJ.
    Reversed.
    Bill in equity for an injunction and receiver.
    Exceptions to report of J. Burrwood Daly, Esq., auditor.
    The opinion of the Supreme Court states the case.
    The auditor charged Francis Shubert with the sum of |17,000 as the unpaid amount of his original subscription to the capital stock of the defendant company.
    The court overruled exceptions to auditor’s report.

      April 30, 1906:

      Error assigned was in overruling exceptions to auditor’s report.

      John Q-. Johnson, with him Avery I). Harrington, for appellant.
    A corporation has the right to purchase its own stock, where the transaction is not prohibited by statute and is made in good faith: 1 Weimer’s Penna. Corp. Law, 286, sec. 188; Kimmel v. Stoner, 18 Pa. 155; Coleman v. Columbia Oil Co., 51 Pa. 74; Stevens’s Appeal, 147 Pa. 422; Dock v. Schlichter Jute Cordage Co., 167 Pa. 370.
    There is no Pennsylvania case which prevents a corporation by action of the board of directors, ratified by unanimous approval of stockholders, whilst it is solvent, from canceling a subscription to its shares. It might very well happen that it could obtain new subscriptions on much better terms being solvent.

      David. Wallerstein, with him Horace H. Francine and John Scott, Jr., for appellees.
    The appellant was liable for his unpaid subscription: Braddock Electric Ry. Co. v. Bily, 11 Pa. Superior Ct. 144; Putnam v. Hutchison, 4 Kansas App. 273 (45 Pac. Repr. 931); Duplex Printing Press Co. v. Clipper Pub. Co., 213 Pa. 207; Paper Co. v. Waples, 3 Woods, 34; Guckert v. Hacke, 159 Pa. 303; Lexow v. Penna. Diamond Drill Co., 5 Pa. Dist. Rep. 499.
   Opinion by

Mr. Justice Elkin,

Had the defendant corporation organized in 1889 for manufacturing purposes under the act of 1874, with an authorized capital stock of $100,000, divided into 1,000 shares of the par value of $100 each, all subscribed, on which assessments, amounting to forty-five per centum had been called and paid, certificates to the full amount issued and outstanding, in 1893, four years after date of its incorporation, when authorized by resolution of the board of directors, acting under a by-law and ratified by all the stockholders, being solvent and without existing creditors, the right to call in the 1,000 shares part paid stock, cancel the original subscriptions, and issue in lieu thereof 450 full paid shares, the remaining 550 shares being held by the corporation for its use and future disposition? If this thing was legally done, the decree must be reversed; if not, it must be affirmed.

On one side it is contended the corporation acted within its corporate powers in so doing, on the other, its right to do so is challenged. The right of appellant to participate in the distribution of the proceeds arising from the sale of the assets of the corporation which became insolvent ten years after the transaction hereinbefore mentioned, depends upon the answer to this question.

Prior to 1874 the law did not require the corporators to be subscribers to the stock. In Densmore Oil Co. v. Densmore, 64 Pa. 43, it was held that the corporators were mere instruments of the law for organization purposes, and need not be subscribers to the capital stock. The act of 1874 changed the rule and required the corporators to be subscribers, but it did not provide that all of the stock authorized to be issued should be subscribed in the first instance. It is necessary to specify in the certificate of incorporation the amount of capital stock authorized to be issued, but the uniform practice followed by the state departments, adopted by the profession and sanctioned by law, is to subscribe for the whole or such part of the capital stock, above the ten per centum required to be paid into the treasury, as shall be necessary for present corporate purposes. It is therefore clear that at the date of incorporation in 1889, the original corporators could have subscribed for 450 shares, thus leaving 550 shares to be issued by the corporation in the future. It seems to follow that if the corporation could have been so organized in the first instance, the same thing may be accomplished four years later, with the consent and by the direction of all interested parties, there being no existing creditors with rights to be affected thereby.

If the corporation had the right to do what was done in 1893, the only question to be considered is whether it was done in a legal manner. One of the by-laws provides that “ an increase or decrease in the amount of subscription to the capital stock of the corporation may be made at such time and in such manner as the holder or holders of the majority in value of stock shall determine at a meeting held for that purpose, of which previous notice shall be given to each stockholder by mailing the same to his last address at least ten days previous to the date of said meeting.”

A meeting of the board of directors was held June 1, 1898, at which a resolution was adopted authorizing this tiling to be done, and directing notice to be given the stockholders. Just when the meeting was held and how the notice, if any, was given does not clearly appear from the testimony. It is contended here that the meeting was not held and notice given as required by the by-law. We do not doubt that the stockholders in a matter of this kind can waive the notice. The act of 1874 authorizing the increase of the capital stock or indebtedness of a corporation provides that notice of the time, place and object of the meeting held for this purpose shall be published once a week for sixty days prior to such meeting. It has been uniformly held that this notice may be waived by the consent of all the stockholders.

In the case at bar it appears that all of the stockholders except one attended the meeting which authorized the decrease of the amount of the subscription, and that the one stockholder not present ratified the transaction by surrendering his original part paid stock, and accepting a less amount of full paid stock in exchange therefor. So far as the record shows, we must conclude there was a waiver of notice and a ratification by all the stockholders of the transaction. Cook on Corporations, 5th edition, 168, states the rule as follows: “ It is legal for a corporation, by common consent, to issue to its stockholders full paid stock to the amount of cash actually paid in, on a large subscription, the first subscription being canceled, provided the arrangement is made before debts are incurred.” While the exact question has not been raised in our courts, it has frequently been passed upon in other jurisdictions. In Republic Life Insurance Company v. Swigert, 135 Ill. 150, it was held that “ the contracts were valid as between the company and the stockholders who gave up their part paid stock and received in lieu thereof full paid stock for one-fifth of the amount relinquished. The transaction was binding upon the company and the stockholders who sold their stock to the corporation, and who should be protected against further payments upon their subscriptions, unless there were at the time of the transaction existing creditors in respect to whose rights it was fraudulent.”

We can see no reason why a solvent corporation as between itself and its stockholders cannot do this thing. A different question might arise if there were any existing creditors to complain. In the present case it was a change of form rather than of substance. The working capital of the corporation was 145,000 before and after the transaction referred to. Prior to the arrangement made in 1893 it was evidenced by 1,000 shares of part paid stock issued and outstanding, and after that date by 450 full paid shares issued and 550 shares not issued, which could be held by the corporation, or sold to new subscribers, or used in other proper ways for the benefit of the corporation.

It is argued, however, that the transaction amounted to a decrease of the capital stock, and is invalid because it was not done in the manner provided by law. This point would be well taken if the capital stock had actually been decreased. There can be no increase or decrease of the capital stock of a corporation except in the manner provided by statute. The answer to this position is, there was no decrease in the capital stock in this case. The authorized capital stock remained the same. The subscription was changed, not the amount of capital stock. The statute is silent on the subject of increasing or decreasing the subscription, and hence the rule invoked does not apply.

It is further contended that the failure of defendant corporation to file annual reports in the office of the recorder of deeds as required by clause 8 of section 39 of the act of April 29,1874, gives the subsequent creditors the right to rely on the original certificate of incorporation. In other words, that since the corporation failed to give no tice.of the cancellation of the original subscription, the calling in of the part paid stock, and the issuance of full paid stock in exchange therefor, subsequent creditors without notice of these changed conditions cannot be affected thereby. If the corporation and the stockholders had the right to do what was done in 1898, and by that act appellant was released on his original subscription, it may be doubted whether the failure of the corporation as a legal entity to perform some act required of it by law at a subsequent date, can be seized upon to impose a liability on the appellant from which he had been released by the corporation and all other interested parties at a prior date. In this connection it may be observed that the filing of the annual report is a duty imposed upon the corporation and not upon the shareholders individually. At most, the filing of the annual report in the office of the recorder of deeds is only for the purpose of giving notice to persons having dealings with the corporation. If the creditor has obtained from any other source the information that he could have received by an examination of such report, he cannot be said to have been prejudiced by the failure of the corporation to perform that duty. In the case at bar, the complaining creditor before giving credit to the corporation secured through commercial agencies a report which in substance showed its exact financial and corporate condition; that the paid in capital was $45,000; that 450 full paid shares were issued and outstanding, and by necessary implication that the remaining 550 shares were not issued. He therefore had all the material facts relating thereto that he could have secured by an examination of the annual report. He sold lumber to the company in the summer of 1903, ten years after the liability of appellant on his original subscription had been extinguished, and the testimony does not show, nor tend to show, that he gave credit to the corporation on account of the original subscriptions. It is clear that he dealt with the corporation on the conditions he found existing in 1903, and not because of the situation prior to 1893.

Decree reversed, and it is ordered that the record be remitted to the court below to have the distribution made in accordance with this opinion.


author: Me. Justice Elkin,

text:
    Ginley v. Ashley Borough, Appellant.

      Negligence — Boroughs—Sidewalk.
    In an action against a borough, to recover damages for personal injuries alleged to have been sustained by a fall on a defective sidewalk, where the defendant introduces evidence to the effect that the sidewalk in question had been removed several weeks prior to the date of the accident, and this is denied by witnesses for the plaintiff, the case is for the jury, and a verdict and judgment for plaintiff will be sustained.

      Argued April 9, 1906.
    Appeal, No. 211, Jan. T., 1905, by defendant, from judgment of C. P. Luzerne Co., Jan. T., 1901, No. 169, on verdict for plaintiff in case of Anthony Ginley and Sarah Ginley v. Ashley Borough.
    Before Mitchell, C. J., Mestrezat, Potter, Elkin and Stewart, JJ.
    Affirmed.
    Trespass to recover damages for personal injuries. Before Lynch, P. J.
    The court charged in part as follows:
    [The defense is that at the time this plaintiff states she fell and was hurt, the planks had been removed from the walk and instead of being a board walk was an ash walk ; that the boards had been removed in the early part of July. It does not matter whether it was in the early part or middle part, the substantial thing is the defendant claims they had been removed before Mrs. Ginley states she fell.
    ********-
    It is evident if no board walk was there at the time this woman testified she fell, she should not have a verdict.

      % ^ & & sfc ifc %

    She bases her claim squarely upon the ground that she was walking upon a rotten board sidewalk, the board gave way without notice and without her knowledge of its condition and she was precipitated into the hole and thus injured. The defense is that there was no board sidewalk there. You judge of the character, bias, interest, if they have any, of witnesses, whether they told you the truth and the whole truth without reserve. It is your duty to reconcile all the testimony if you can. If you cannot, then you have a right to believe whom you will.]
    Verdict and judgment for plaintiff, for Anthony Ginley for $700.00 and for Sarah Ginley for $2,500.00. Defendant appealed.

      Frror assigned among others was portion of charge as above, quoting it.

      Charles JE. Keck, with him Thomas W. Hart, for appellant.

      Frank McCormick, with him Ii. J. Fever, for appellee.

      April 30, 1906:
   Opinion by

Me. Justice Elkin,

At the trial the defendant borough offered testimony to show that the board walk, which the plaintiffs claim was not properly maintained, by reason of which negligence Mrs. Ginley was injured, had been removed several weeks prior to the date of the accident. It was, therefore, earnestly contended that the accident could not have resulted from defects in the board walk, when in point of fact no such walk existed. This is the disputed fact in the case. The plaintiffs, on the other hand, produced witnesses who testified that the board walk was there at the time of the accident. There being a substantial dispute about this question, and the testimony being contradictory in reference to same, it was a question of fact for the jury to determine.

We have carefully read the charge of the learned trial judge, reviewed the testimony and considered the assignments, but have not been convinced that there is anything amounting to reversible error in the case. No points were submitted by either side and the trial judge left the whole question to the jury in a fair and impartial charge. This was a case for the jury and we see no reason to disturb their finding.

Judgment affirmed.


text:
    Byron v. Central Railroad of New Jersey, Appellant.

      Negligence — Railroads—Crossing—Infant.
    In an action by a boy twelve years of age against a railroad company to recover damages for personal injuries sustained at a railroad crossing after dark, it appeared that there were no lights at the crossing, and that the train which struck the boy was a special train not running on a regular schedule. The engine was running with the tender in front, and there was evidence that the usual signals were not given as the train approached the crossing. The boy’s presumption of incapacity to appreciate the danger was not conclusively overcome by the defendant’s testimony. Held, that the case was for the jury and that a verdict and judgment for plaintiff should be sustained.
    Argued April 12, 1906.
    Appeal, No. 119, Jan. T., 1906, by defendant, from judgment of C. P. Luzerne Go., May T.? 1902, No. 496, on verdict for plaintiff in case of Thomas Byron, by his next friend and father, Thomas J. Byron, and Thomas J. Byron in his own right as father of Thomas Byron v. Central Railroad of New Jersey.
    Before Mitchell, C. J., Fell, Mestrezat, Potter and Elkin, JJ.
    Affirmed.
    Trespass to recover damages for personal injuries. Before Wheaton, J.
    At the trial it appeared that on March 4,1903, plaintiff was injured at a grade crossing in Newport township.
    The facts relating to the circumstances of the accident are stated in the opinion of the Supreme Court.
    Plaintiff presented the following point:
    1. There is not sufficient evidence in this case to so conclusively rebut the presumption that Thomas Byron, one of the plaintiffs’ twelve years and two days old at the time of the accident on March 4,1902, that the court should decide the question as one of law; but in view of the evidence, and especially of the prevailing condition of darkness, absence of signals, light on the tender and engine, and it running backwards, the jury should determine the fact under proper instructions from the court. Answer: I affirm that point and I have tried to give you those instructions. The point suggests to me that perhaps I have not dealt quite so fully as I might have done, upon the testimony concerning the darkness and the absence of light and the rate of speed and the fact the engine was backing down, but I take it for granted that you will take all those things into consideration — you heard this evidence — in reaching a conclusion as to what the truth of the matter is. [1]
    Defendant presented these points:
    3. That according to the testimony of the plaintiff, Thomas Byron, he stopped within a few feet of the track, looked both ways and listened for an approaching train and heard and saw nothing; that he immediately stepped on the track, saw the tender approaching, tried to back off and was struck by the tender and had his foot crushed. Under the undisputable testimony there was nothing to obstruct the sight of the approaching train or to prevent its being heard ; therefore, the plaintiff cannot recover in this action, and the verdict must be for the defendant. Answer : I decline to affirm that point. In determining what the capacity of this boy was — and these points suggest this to me — in determining what he knew about the surroundings there, so as to find out whether he fully appreciated the danger, which is apparently indicated by the fact that he was struck so immediately when he went on the track, you will take into account the testimony of the father that this boy had been at school since he was six years old; the further fact, if you believe it to be a fact, that he was at that time a rugged, healthy, normal boy, good sight, good hearing, nothing the matter with him; the testimony, if you believe it, that he daily, for some time — at least a year prior to this accident — crossed back and forth on his way from his home to school and from school to his home, over this crossing; the testimony which he gave himself, that when he got close to the crossing — within three steps — he stopped, looked and listened. You will take into account the testimony of Johnny Barrett, who was with him — I think it was the Barrett boy — who said that when they stopped there Tommy Byron said, “ listen, be still, may be the engine will be coming,” or words to that effect; I have not got it exactly but it amounted to about that. All that you will take into account as bearing upon the question of whether he knew there was danger there, and whether he knew the particular danger which came to him was likely to be there, and whether he had capacity to understand that and avoid it, and neglected to so act. [2]
    4. That under all the evidence the verdict must be for the defendant. Answer: I refuse to affirm that point. I have left this case to you to determine upon the facts of it. I do not believe the evidence concerning the alleged contributory negligence of this boy is of such a character as under the law would enable me property, as a judge, to declare he was legally guilty of contributory negligence, and I leave it to you, among the other facts of the case, to determine what the truth of the matter is. [3]
    The court charged in part as follows:
    [Briefly stated, it is claimed by the plaintiff in this case, that the defendant railroad company, having the management and control of a locomotive engine and cars and running the same over a grade crossing in Newport township on a track, in March, 1902, was under a duty implied by law to use due and proper care and skill in and about the handling, managing and driving of such locomotive and cars along the said railroad and over the said highway. That at the time in question, to wit: the evening of March 4, 1902, disregarding its duty it negligently drove the said engine across said highway and injured Thomas Byron, who was lawfully traveling thereon. The specific acts of negligence alleged are : that the engine was driven backwards at a high rate of speed and without any warning by light, whistle or bell, of its approach to said highway. [4]
    April 30, 1906 :
    Verdict and judgment for Thomas Byron for $8,000, and for Thomas J. Byron, $2,600. Defendant appealed.

      Error assigned were (1-4) above instructions, quoting them.

      Henry W. Palmer, with him T. W. Hart, Arthur Hillman and A. H McQlintooh, for appellant.
    An infant of the age of the plaintiff in question would, under the circumstances, have sufficient capacity to be sensible of his danger and of his power to avoid it, and this presumption would stand until it was overthrown by clear proof of the absence of such discretion : Holden v. R. R. Co., 169 Pa. 1; Greenway v. Conroy, 160 Pa. 185; Wendell v. R. R. Co., 91 N. Y. 420; B. & O. R. R. Co. v. Schwindling, 101 Pa. 258; Moore v. R. R. Co., 99 Pa. 301; Chilton v. Traction Co., 152 Pa. 425; Funk v. Traction Co., 175 Pa. 559; Honor v. Albrighton, 93 Pa. 475; Ash v. Verlenden, 154 Pa. 246: P. & R. R. R. Co. v. Spearen, 47 Pa. 300.

      John T. Lenahan, Edwin A. Lynch and James L. Lenahan, for appellees.
    The case was for the jury: Beach v. Penna. R. R. Co., 212 Pa. 567; Parker v. St. Ry. Co., 207 Pa. 438.
   Opinion by

Mr. Justice Elkin,

The injured boy was twelve years of age. The accident occurred at a grade crossing after dark. There were no lights at the crossing or station nearby. The train was not running on a regular schedule. It was a special, made up for a temporary purpose. The engine was running with the tender in front, and therefore the approach of the train could not be seen by the customary headlight. There is some evidence that the usual signals were not given as the train approached the crossing. These are the negligent acts on which appellees rely to recover in this action. They are clearly sufficient to take the case to the jury on the question of defendant’s negligence. The boy being under fourteen years of age, the presumption of incapacity to appreciate the danger arose and was not so conclusively overcome by the testimony offered at the trial as to justify a court in holding as a question of law that he was guilty of contributory negligence. We see no reason, either in fact or law, to distinguish the case at bar from the long line of cases in which this rule has been recognized and followed in our state. This was also a question of fact for the jury. The learned trial judge in a careful, adequate and well considered charge, submitted the case to the jury where it belonged.

Assignments of error overruled and judgment affirmed.


author: Mr. Justice Brown,

text:
    Finletter, Appellant, v. Acetylene Light, Heat and Power Company.

      Corporations — Stock—Stock issued for patent rights — Bonus of stock.

    Where the stock of a corporation has been issued for patent rights, the recipients may give such stock as a bonus to subscribers for other stock of the corporation, and the subscribers who take such stock as paid up stock, are not liable for assessments.
    Where stock of a corporation has been issued for patent rights, the value of the patent rights is to be determined as of the time of the formation of the company, and not after the company has become insolvent from any particular cause.

      Corporations — Stock—Assessments—Transfer of stock.

    Where the original subscribers to the stock of a corporation have parted with their stock, with all installments paid at the time of the transfers, and the transferees of the stock have been accepted by the company as shareholders, the original subscribers cannot be held for assessments.
    Argued Jan. 10, 1906.
    Appeal, No. 147, Jan. T., 1905, by plaintiff, from decree of C. P. No. 1, Pbila. Co., Sept. T., 1897, No. 733, dismissing bill in equity as to certain defendants in case of Robert W. Finletter, receiver of the Acetylene Light, Heat and Power Company v. The Acetylene Light, Heat and Power Company et al.
    May 7, 1906:
    Before Mitchell, C. J., Fell, Brown, Mestrezat, Potter, Elkin and Stewart, JJ.
    Affirmed.
    Bill in equity to enforce alleged liability on stock assessments. Before Beitler, J.
    The opinion of the Supreme Court states the case.

      Error assigned was decree dismissing the bill as to the appellees.

      Preston K. Erdman and Edwin O. Michener, for appellant.—
    Where stock is issued for property as full paid stock, and there is actual fraud in the transaction, it will be deemed as stock subject to assessment at the suit of creditors: Camden v. Stuart, 144 U. S. 104 (12 Sup. Ct. Repr. 585) ; Lloyd v. Preston, 146 U. S. 630 (13 Sup. Ct. Repr. 131) ; Richardson v. Green, 133 U. S. 30 (10 Sup. Ct. Repr. 280) ; Coit v. North Carolina Gold Amalgamating Co., 119 U. S. 343 (7 Sup. Ct. Repr. 231) ; Taylor v. Walker, 17 Am. & Eng. Corp. Cases (N. S.), 321.
    The following cases are submitted as authority that the subscriber for stock subject to call is not relieved from his liability to creditors by a transfer of his shares, even if the transfer is approved by the company: Messersmith v. Bank, 96 Pa. 440; Lane’s Appeal, 105 Pa. 49 ; Upton v. Tribilcock, 91 U. S. 45.

      Frank P. Prichard and II B. Gill, with them Andrew Wright Crawford, Andrew Zane, Frederick R. Reeves, and James Fitzpatrick for appellee,
    cited: Willock v. Dilworth, 204 Pa. 492; American Tube & Iron Co. v. Hays, 165 Pa. 489; Warren-Ehret Co. v. Franklinville Ice Mfg. Co., 198 Pa. 412.
   Opinion by

Mr. Justice Brown,

The Acetylene Light, Heat and Power Company was incorporated for the purpose of producing acetylene gas and supplying it to consumers Julius J. Suckert and Edward M. Dickerson held letters patent for their method of producing this gas at a price very much less per cubic foot than the cost of producing coal gas. Joseph A. Vincent secured from them an option to purchase a license under their patent for certain territory embracing Philadelphia and its suburbs. He paid $10,000 for this option and agreed to pay $90,000 additional for the license within a fixed time and to give a certain proportion of the stock of a company to be organized for the purpose of producing the gas, to which company he was to assign the license. He induced Charles C. Adams and Edward C. Napheys, two of the appellees, and others to organize the company of which the appellant is the receiver. Its capital stock was $1,000,000, consisting of 20,000 shares of the par value of $50.00 each. The original subscribers to the capital stock took 2,000 shares and paid for them fully in cash, their subscriptions amounting to $100,000, or ten per centum of the authorized capital. In the application for the charter it was stated that, of the remaining 18,000 shares, 18,000, of the par value of $650,000, were to be issued to Joseph A Vincent in part payment for the assignment by him to the company of the exclusive license issued to him by Suckert and Dickerson. Subsequently the capital stock of the company was increased to $2,000,000, and in the application for the increase, filed with the secretary of the commonwealth, it appeared that three-fourths of the additional 20,000 shares were to be given in payment of a license for additional territory. Of the original 13,000 shares issued to Vincent, he gave Dickerson and Suckert 5,000,and of the 15.000 issued to him under the increased capital he gave them 5.000 more. Of the 40,000 shares which the company was authorized to issue, Suckert and Dickerson, the patentees, received 10,000, Vincent 18,000 and the company had 12,000 shares in its treasury, 2,000 of which were issued to the original subscribers. Vincent divided 10,000 shares between himself, Napheys, Adams and one Devine, having borrowed from the latter a part of the $10,000 which he paid to Dickerson and Suckert for the option to purchase the licenses, and turned over through Napheys 8,000 shares to the original subscribers under an agreement which he made with them that they should receive four additional shares as a bonus for each share of stock for which they subscribed and paid.

The company became insolvent, and, upon the appointment of the appellant as its receiver, he filed this bill, in which he prays for a decree that the 8,000 shares of stock given by Vincent to Napheys, and transferred by the latter to the original subscribers, be decreed to be not full paid stock; that it was issued in fraud of the company and of the other stockholders and is liable in the hands of the present holders up to par for the purpose of paying the debts of the company; that it be decreed that the 10,000 shares retained by Vincent, and by him transferred to other parties, were issued in fraud of the company and of the other stockholders, and that the same are liable in the hands of the present holders for such amount in excess of what they have paid therefor up to the par value thereof as may be necessary to pay the debts of the company. The main contention of the appellant is as to the liability to assessment of the stock which was issued to Vincent in payment of the licenses.

In asking that the appellees to whom the stock was given as a bonus be compelled to pay for it, the appellant invokes art. XVI, sec. 7, of the constitution, which declares that “no corporation shall issue stocks or bonds except for money, labor done, or money or property actually received; and all fictitious increase of stock or indebtedness shall be void.” The 17th section of the Act of April 29, 1874, P. L. 73, provides that full paid stock may be issued for patent rights to the amount of the value thereof, and the first and important question passed upon by the court below was as to the value of the licenses to use the Suckert and Dickerson patents. If these patents were valuable, or were in good faith so regarded by the company, it could have issued for the licenses, and the owner of them could have received from it, paid up stock for them, for they were property within the meaning of the constitution and the act of assembly. At the time these licenses and the patents under which they were issued were brought to the attention of those who subsequently organized the company, they apparently were very valuable, and the learned court below has found that, if the expectations of those interested in the company had been realized, the returns on the $2,000,000 of capital would probably have been enormous ; and the distinct finding is that the appellant entirely failed to substantiate his averment that the patents had no value. The patentees received $100,000 in cash for the licenses and 10,000 shares of the stock from Vincent, who had first received from the company for the licenses $100,000 in cash and 28,000 shares of the capital stock, the value fixed in good faith by him and those who were to form the company, all of which appeared in the applications for the original charter and for the increase of the capital stock. It cannot, therefore, be said that, in this, fraud was practiced upon anybody, especially in view of a further finding by the court that there was nothing whatever in the evidence to justify it in holding that the stock issued to Vincent was issued for licenses that were overvalued at the time. But for the action of the fire insurance companies, after the explosion in New Haven, Connecticut, in refusing to insure any property or carry any insurance already in force on any property in which liquified acetylene gas was introduced, the expectations of the company might have been realized. In this proceeding the question of the value of the licenses is to be determined as of the time of the formation of the company, and not after it has become insolvent from any particular cause: American Tube & Iron Co. et al. v. Hays et al., 165 Pa. 489.

Nothing that was done by Vincent was concealed ; on the contrary, notice of what he and the subscribers to the capital stock proposed to do appeared in the application for the charter, and the stock that was lawfully issued to him, in consideration of his assignment of the licenses, became his property, to do with as he pleased. As was said in Willock v. Dilworth, 204 Pa. 492, he may very naturally have felt that the stock, ora portion of it, issued to him for licenses that were not overvalued as property, ought to go into the hands of those who were furnishing not only the actual cash capital required for the incorporation of the company, but the business skill and experience needed to make it succeed and its stock grow more valuable. Under the court’s finding, Vincent lawfully received all the stock that was issued to him in the first instance as full paid and non-assessable, and neither he nor those to whom he transferred portions of it can now be compelled to pay anything thereon. The case is governed by Willock v. Dilworth, supra, and nothing more need be said on the main question involved.

Another question raised by the assignments of error, but not seriously pressed oar the arguaaaent, is the liability of origiaial subscribers to the stock on calls made oar assessanearts levied after the stock had been transferred to others. The conclusion of the court was, that where original subscribers parted with their stock, with all installments paid at the time of the transfers, and the transferees of the stock had been accepted by the company as shareholders, the original subscribers could not be held for assessments. This was unquestionably correct: Lane’s Appeal, 105 Pa. 49.

All of the assignments of error are dismissed, and the decree below is affirmed at the cost of the appellant.


text:
    Marles Carved Moulding Company v. Stulb, Appellant.

      Corporations — Stock—Stock subscription — Bonus of stock.

    A stock subscription is not invalid because a bonus of stock is to be given with the stock subscribed for, where it appears that the bonus stock is to come, not from the company, but from a person to whom it had been issued in the payment of patent rights assigned to the company.
    A subscriber to the stock of a corporation cannot set up as a defense, in a suit against him upon his subscription, that when his signature was obtained the agent of the company represented to him that he never would be called upon to pay one cent of the subscription price, and that he subscribed under this condition.
    Argued Jan. 9, 1906.
    Appeal, No. 122, Jan. T., 1905, by defendant, from judgment of C. P. No. 4, Phila. Co., June T., 1902, No. 2,525, on verdict for plaintiff in case of Maries Carved Moulding Co. v. Theodore B. Stulb.
    Before Mitchell, C. J., Fell, Brown, Mestrezat, Potter, Elkin and Stewart, JJ.
    Affirmed.
    Assumpsit on a stock subscription.
    At the trial it appeared that the subscription paper was as follows:
    “ Marles Carved Moulding Company.
    “ Room 614 Real Estate Trust Building, Philadelphia, Pa. Capital $4,500,000 consisting of 900,000 shares of $5.00 each. Preferred stock 100,000 shares. Common stock 800,000 shares.

      “ Subscriptions hereunder are made upon the following understanding :
    “ 1. That this company has acquired letters patent of the United States of America granted to Henry Maries, No. 616,002, reissued as No. 11,839 July 3, 1900; No. 653,813 July 17, 1900, and No. 658,270 September 18,1900, covering the Maries Carving Machines.
    “ 2. That the preferred stock shall receive all of the net earnings up to its total par value, so returning the full amount of this subscription, and it shall then be converted into common stock. That the said preferred stock shall be a first lien to the amount of its principal upon the assets of the company. That without the consent of two-thirds in amount of the preferred stock there shall not be created any other stock ranking equally with or in priority to it.
    “ 3. That with each share of preferred stock the subscriber shall receive as a bonus three shares of full paid common stock from the Real Estate Trust Company of Philadelphia, trustee, deliverable upon the subscription payment.
    “4. That no subscription shall be binding unless and until $350,000 of preferred stock is subscribed, the remaining $150,000, or any part thereof not subscribed hereunder, to be retained in the treasury to be sold if required, for the benefit of the company. Subscriptions may be taken upon duplicates thereof, all of which shall be taken as one original.
    “ 5. The company reserves the right, in event of over subscription, to make allotments as it may see fit.
    “ We, the undersigned, hereby subscribe to the number of shares of the preferred capital stock of the Maries Carved Moulding Company at $5.00 per share, set opposite our respective names below, agreeing to pay for the same to the Real Estate Trust Company of Philadelphia, trustee, after $350,000 has been subscribed hereunder, 25$ on ten days call and 25$ each in thirty, sixty and ninety days thereafter.”
    During the trial counsel for the defendant made the following offer:
    Counsel for defendant proposes to prove that Richard F. Loper, the witness on the stand, acting as agent for the Maries Carved Moulding Company, obtained the signature of the defendant in this case under the representation that he never would be called upon to pay one cent of the subscription price, and that the defendant subscribed under these conditions and that he had authority to make such representation to Mr. Stulb and others, and that such authority was given to him by the company.
    Objected to. Objection sustained. Exception noted for defendant by direction of the court. [1]
    Mr. Grady: Describe as accurately as you can remember the conversation you had with Mr. Stulb concerning this subscription.
    Objected to. Objection sustained. Exception noted for defendant by direction of the court. [2]
    Defendant was asked this question : “ Q. What was the inducement held out to you as the result of which you subscribed to this stock ? ”
    Objected to.
    “ Q. What was said to you ? ”
    The Court: By whom ?
    Mr. Grady: By anybody that had authority to obtain his subscription.
    The Court: In the first place you will have to show the authority.
    Objection sustained. Exception noted for defendant by direction of the court. [3]
    “ Q. Were you advised by anyone in authority that no assessment would be required of you ? ”
    Objected to. Objection sustained. Exception noted for defendant by direction of the court. [4]
    The court gave binding instructions for plaintiff.
    Verdict and judgment for plaintiff for $3,006.66. Defendant appealed.

      Errors assigned were (1-4) rulings on evidence, quoting the bill of exceptions, and (5) in giving binding instructions for plaintiff.

      J. Howard Gendell, with him John O. Grady, for appellant.
    A contract by a promoter to take stock off the hands of a subscriber is valid: McClymonds v. Stewart, 2 Pa. Superior Ct. 310.

      May 7, 1906 :
    The transaction looks like a scheme on the part of Granger to make a fortune out of the sale of a patent on which he had an option. This he cannot lawfully do: Simons v. Vulcan Oil & Mining Co., 61 Pa. 202; Short v. Stevenson, 63 Pa. 95 ; Yeaney v. Keck, 183 Pa. 532; Rice’s App., 79 Pa. 168; Russell v. Fuel Gas Co., 184 Pa. 102.

      John Hampton Barnes, for appellee.
    It is not competent to vary the terms of a stock subscription paper by parol evidence between the subscriber and the person who offers the paper for subscription, no matter who that person may be: Miller v. R. R. Co., 87 Pa. 95; Guarantee, etc., Co. v. Mayer, 141 Pa. 511; Phila., etc., Ry. Co. v. Conway, 177 Pa. 364.
    A subscription to stock of a corporation is not only an undertaking. with the corporation, but with all other stockholders, and accordingly the corporation itself cannot relieve : Bristol Iron & Steel Co. v. Selliez, 175 Pa. 18; Phila., etc., Ry. Co. v. Conway, 177 Pa. 364.
   Opinion by

Mr. Justice Brown,

The appellant subscribed for five hundred shares of the preferred capital stock of the Maries Carved Moulding Company. There were certain conditions annexed to his subscription, all of which have been complied with by the company. One of these was that he was to receive from the Real Estate Trust Company of Philadelphia, for each share of stock subscribed for by him, three shares of full paid common stock of the company. Of this condition he now complains and asks us to say that the agreement of the company that he should receive this bonus is such a fraud in the eye of the law as invalidates all subscriptions made under it. It is a sufficient answer to this to say that the bonus stock was not to be issued by the company, but by the Real Estate Trust Company for A. O. Granger, to whom it was to be issued by the appellee in part payment of patent rights to be acquired from him by the company. The issue of this stock to him for such a purpose was valid under the constitution and the act of April 29, 1874, and, after he received it, he could do as he pleased with it in inducing others to subscribe to’the capital stock of the company. We have discussed this more fully in an opinion this day filed: Finletter, Receiver, v. The Acetylene Light, Heat and Power Company et al., ante p. 86.

By the first, second, third and fourth assignments of error the appellant complains that he was not allowed to prove that when his signature was obtained the agent of the company represented to him that he never would be called upon to pay one cent of the subscription price, and that he subscribed under this condition. If he had been allowed to prove this, it would simply have been proof of a fraud that he, in connection with the representative of the company, undertook to perpetrate upon the other subscribers to the capital stock, for his undertaking was not only with the corporation but with them as well. In Miller v. Hanover Junction, etc., Railroad Company, 87 Pa. 95, the action was to recover the amount of subscription to the stock of the company, and the defendant offered to prove on the trial that he had been induced to subscribe by reason of certain parol representations made to him by officers of the company that the railroad should be built, not as stated in the subscription book, but along his house, and upon the east side of a river, and that he would not be obliged to pay until the road was so built. In holding that this evidence was properly rejected, what we said of the defendant there applies to the one here : “ Had he expressed in writing, on the subscription book, the condition proposed to be proved, it would have been fair notice, to his fellow-subscribers, that his subscription amounted to nothing; was, in fact, a mere sham, since the condition, opposed, as it was, not only to the expressed action of the company but to the condition involved in every other subscription, could not possibly be enforced. Now, as we have already shown, this subscription was specially designed to carry out a common adventure, in which the company was but a means rrsed for its accomplishment, and the interests of which were but secondary; hence it follows, that if Miller succeeded in avoiding his obligation, he does so at the expense of his co-subscribers and in fraud of their rights. Every one who signed after him did so on the faith of his signature, as he did upon the faith of the signatures of those who preceded him, and to permit him now to set up a secret parol arrangement, by which he may be released whilst his fellows continue to be bound, would be anything but just. As was said in the ease of Graff v. The Railroad Co., 7 Casey, 489 (per Woodward, J.), a subscription to a joint stock is not only an undertaking to the company, but with all other subscribers. Such contracts are trilateral, and even if fraudulent as between two of the parties, they are to be enforced for the benefit of the third.’ This quotation expresses a principle applicable to the case in hand, and aptly illustrates the reason why the defendant should be estopped from setting up the secret parol agreement between himself and the agents of the company.” The assignments are all overruled and the judgment is affirmed.


author: Mr. Chibe Justice Mitchell,

text:
    Strauss, Appellant, v. Allentown.

      Waters — Flow of surface water — Municipalities—Damnum absque injuria.

    A city is not liable to a property owner for the increased flow of surface water over or onto his property, arising merely from the changes in the character of the surface produced by the opening of streets, building of houses, etc., in the ordinary and regular course of the expansion of the city.
    Every man has the right to the natural, proper and profitable use of his own land, and if in the course of such use without negligence unavoidable loss is brought upon his neighbor, it is damnum absque injuria. This rule applies to municipalities as well as to individuals.
    Argued Jan. 31, 1906.
    Appeal, No. 328, Jan. T., 1905, by plaintiffs, from order of C. P. Lehigh Go., Oct. T., 1903, No. 11, refusing to take off nonsuit in case of Isabella Strauss and Thomas Strauss, her husband, and Henry N. Sleifer v. City of Allentown.
    Before Mitchell, C. J., Brown, Mestrezat, Potter and Stewart, J J.
    Affirmed.
    Trespass to recover damages for injuries to a mill race. Before Trexler, P. J.
    The facts are stated in the opinion of the Supreme Court.

      Error assigned was refusal to take off nonsuit.

      Lawrence H. Rupp, with him John Rupp and Evan Eolben, for appellants.
    The city was liable, as there was an accumulation and concentration of an unnatural quantity of water and a change in the nature and character of the watershed : Huddleston v. West Bellevue Borough, 111 Pa. 110 ; Frederick v. Lansdale Borough, 156 Pa. 618.
    May 7, 1906:

      Leo Wise, city solicitor, for appellee.
    The nonsuit was properly entered: Brunhouse v. York, 5 York, 164; Fair v. Philadelphia, 88 Pa. 309 ; Allentown v. Kramer, 73 Pa. 406 ; Carr v. Northern Liberties, 35 Pa. 324 ; Penna. R. R. Co. v. Marchant, 119 Pa. 541; Stork v. Philadelphia, 195 Pa. 101; Gift v. Reading, 3 Pa. Superior Ct. 359; Munn v. Pittsburg, 40 Pa. 364.
   Opinion by

Mr. Chibe Justice Mitchell,

The cause of action is very fairly set out in appellants’ argument, thus, “ Briefly stated the facts are as follows: Isabella Strauss owns a mill property lying outside but near and along the northern boundaries of the city of Allentown, a municipal corporation of the third class.' The water that flows from a watershed, a large portion of which lies within the city limits, drains into the plaintiff’s tailrace. As municipal improvements are made the volume of water is very greatly increased. The paving of streets, the opening and extension of streets, the making of gutters and drains, the building of houses, etc., prevents the water from sinking into the ground as it was accustomed to do to a large extent, and accumulates large volumes of water and accelerates its force so that great quantities of debris are carried into the tailrace and a deep gully has been washed out. The volume of water is of itself sufficient to cause back water in the tailrace. For these reasons the value of the mill property has greatly decreased. The city has made no effort to prevent the damage to the plaintiff’s property. To recover for the damage that has been caused by the depreciation in the value of the property because of the interference with the free operation of the mill due to the dead water accumulated in, and the debris carried into, the tailrace the plaintiffs bring this suit.” This statement, however, must be supplemented by the important facts that although the city extended its limits so as to include the land in regard to which this controversy arises, it had not in any degree enlarged the area of the watershed or changed the flow of the surface water in any way except as a consequence of the gradual and ordinary development of rural into urban property. The city had not diverted the water into any artificial channels and it flowed into plaintiff’s tailrace as it had done before, because the race was at the lowest point of the watershed. The city had the power to build sewers or culverts to carry off the water, but had not done so.

The question therefore is, in brief, is the city liable to a property owner for the increased flow of surface water over or onto his property, arising merely from the changes in the character of the surface produced by the opening of streets, building of houses, etc., in the ordinary and regular course of expansion of the city.

It is conceded by counsel for both parties that except a common pleas case which will be noticed later, they have found no Pennsylvania decision on the question, and my own supplemental investigation has found none, and has also disclosed a notable dearth of direct authorities elsewhere.

But the guiding principle for a decision is not at all doubtful, and is of frequent application. Every man has the right to the natural, proper and profitable use of his own land, and if in the course of such use without negligence, unavoidable loss, is brought upon his neighbor, it is damnum absque injuria. This is the universal rule of the common law, and nowhere is it more strictly enforced than in Pennsylvania. After elaborate and repeated argument, and the most mature consideration, it was applied to a case admittedly of great hardship, difficulty and doubt, involving a serious choice of evils, in Pennsylvania Coal Co. v. Sanderson, 113 Pa. 126. No ordinary case could be sufficient to raise a further doubt on the rule of its application where the use is proper and the damage unavoidable: Collins v. Chartiers Valley Gas Co., 131 Pa. 143.

There is no sound reason why the same rule should not apply to municipalities as to individuals. A farmer with a piece of woodland on a hillside may clear out the underbrush or cut down the trees altogether, though thereby the water which had seeped slowly to the lower level is accelerated in its flow, and may cause damage: Kauffman v. Griesemer, 26 Pa. 407. The line of distinction is reached when he cuts an artificial channel by which what would otherwise be surface water is concentrated and discharged, with greater force, on a particular point in the servient land : Miller v. Laubach, 47 Pa. 154.

The same rule must apply to the natural and proper development of a municipality. Cities are authorized to open, grade and improve streets and the abutting lot owners may build according to their requirements. In this natural change and development from agricultural or rural to urban territory some disturbance of the surface drainage is inevitable, but without negligence the municipality is not liable for the results : Carr v. Northern Liberties, 35 Pa. 324. Though a city may be authorized to construct sewers oran adequate system of drainage it is not bound to do so, nor is it liable for an erroneous judgment as to what will be adequate: Fair v. Philadelphia, 88 Pa. 309.

The constitutional provision with reference to property “ injured ” in the construction of public works, has made no change in the principles applicable to this case: Penna. R. R. Co. v. Marchant, 119 Pa. 541; Stork v. Philadelphia, 195 Pa. 101.

As already said the only case in this state upon the precise point is Brunhouse v. York, 5 York, 164, in which Bittengeb, J., upon the same view held the city not liable, and non-suited the plaintiff. But the cases above cited rest on principles clearly analogous and lead to the same result. And such is the view of the best text-writers.

“ In this connection may be considered the liability of municipal corporations for injuries to private property in consequence of being overflowed with water caused by improvements made or work done upon the streets under their authority. And here it is important to distinguish between natural streams flowing in channels between defined and actual banks, and surface water caused by rain or melting snow; for the law relating to them is essentially different, and the powers of the municipality much greater with respect to the latter than the former: ” 2 Dillon on Municipal Corporations, sec. 1038 (4th ed.)

“ As to surface water, quite different principles apply. This the law very largely regards (as Lord Tenterden phrases it) as a common enemy which every proprietor may fight to get rid of as best he may. The reports contain many instances in which it has been sought to make municipal corporations liable for damages caused in various ways-by surface water to private property. Reference will first be made to cases in which the work of grading or improving the streets has been the cause of injury. Where the damage has resulted solely as a consequence of • the proper execution of a legal power by the corporation, it falls within the principles already mentioned, and there is no implied liability therefor: ” 2 Dillon, sec. 1039.

“ Authority to establish grades for streets, and to grade them, involves the right to make changes in the surface of the ground, which may affect injuriously the adjacent property owners; but where the power is not exceeded, there is no liability, unless created by special constitutional provision or by statute (and then only in the mode and to the extent provided) for the consequences resulting from the power being exercised and properly carried into execution: ” 2 Dillon, sec. 1040.

“ Where a municipality keeps within the limits of its streets, and within the limits of its jurisdiction, and the injury is wholly incidental to, or consequential upon the exercise of its lawful powers, there is no implied or common-law liability. This is everywhere admitted: ” 2 Dillon, sec. 1051.

Judgment affirmed.


author: Mr. Justice Fell,

text:
    Vulcanite Paving Company v. McNichol, Appellant.

      Contract — Municipal contractor — Paving—Affidavit of defense.

    In an action by a subcontractor against a city contractor to recover for asphalt pavement, where the statement of claim avers that the work was to be paid for on monthly estimates, and that it had been accepted as satisfactory, an affidavit of defense is sufficient which distinctly denies that payments were to be made on monthly estimates, or that the work had been accepted as satisfactory, and avers that the work was not to be paid for unless and until the same was paid for by the city.
    In such a case the contractor is not required to aver that he had fully complied with his contract with the city, and that the refusal of the latter to pay was unwarranted. The withholding of payment by the city gave rise to no inference of a default on the contractor's part. It may have been for a good reason, or for a bad one. There was no presumption either way.

      Argued March 22, 1906.
    April 30, 1906:
    Appeal, Nos. 60 and 61, Jan. T., 1906, by defendant, from order of C. P. No. 1, Phila. Co., Sept. T., 1905, No. 2,544, making absolute rule for judgment for want of a sufficient affidavit of defense in case of The Vulcanite Paving Company v. Daniel J. McNichol, James P. Mc-Nichol and Israel W. Durham, Copartners, trading as D. J. Mc-Nichol.
    Before Mitchell, C. J., Fell, Brown, Mesteezat and Stewaet, JJ.
    Reversed.
    Rule for judgment for want of a sufficient affidavit of defense.
    Rule to open judgment.
    The facts are stated in the opinion of the Supreme Court.

      Error assigned in No. 60 was in discharging rule to open judgment.

      Error assigned in No. 61 was in making absolute rule for judgment for want of a sufficient affidavit of defense.

      Meredith Hanna, with him James W. King, for appellants,
    cited: Murphy v. Liberty Nat. Bank, 179 Pa. 295; Fritz v. Hathaway, 135 Pa. 274.

      Edwin O. Miehener, for appellee.
   Opinion by

Mr. Justice Fell,

This appeal is from an order making absolute a rule for judgment for the amount for which the affidavit of defense was insufficient with leave to proceed for the balance. It appears from the statement of claim that the defendants had entered into a contract with the city of Philadelphia to do all the work and to furnish the materials required in the improvement of a boulevard, and that the plaintiff contracted with them to do a part of this work. There was no formal contract between the parties. The plaintiff submitted a proposal in writing in which it named the prices for which it would do particular kinds of work. The time of payment was fixed by oral agreement. It is alleged in the statement that payments were to be made monthly on estimates furnished by the plaintiff, and that there was due $9,002.80 for work done and material furnished in April, May, June and part of July, 1905; that estimates for these months had been delivered to the defendants and accepted without objection; that the work was done in accordance with the contract between the plaintiff and the defendants and was accepted as satisfactory, and that no objection to it had been made by the defendants nor by the city.

The affidavit of defense contains a distinct denial that payments were to have been made on monthly estimates, or that the work done by the plaintiff had been accepted as satisfactory. It sets up an agreement as to the time of payment as follows: “ It was further agreed that when estimates should be made each month by the district surveyor of the fifth district, and rendered to the defendants by the assistant of the bureau of highways for the seventh district, showing the work done and materials furnished by the defendant, up to the date of making the estimate, including the work done and materials furnished by plaintiff, then defendants should pay plaintiff for their work and materials after defendants were paid for the same by the city of Philadelphia; and defendants were not obliged to pay for such work or materials unless and until the same were paid for by the city of Philadelphia; and the plaintiff should do over again at its own expense any part of its work which the defendant should be required by the city of Philadelphia to have done over again in accordance with its contract.”

The additional averments in the affidavit that are material in considering the question before us are that the city had not paid the defendants for any work done under their contract after April 29, but had refused to pay for the same, and had stopped all further work under its contract with the plaintiff. There is an admission in the affidavit that the defendants had been paid by the city the amount of an estimate rendered May 1, 1905, and that in the estimate was included work done by the plaintiff to the amount of $2,270.60.

On the argument of the rule for judgment it was contended by the plaintiff’s counsel that the affidavit was insufficient to prevent judgment for any part of the plaintiff’s claim, and the court was asked to make the rule absolute for the whole amount thereof. This was done on the ground that as to the first item of $2,270.60 for work done in April the defendants had received payment from the city, and that as to the other items the plaintiff was not required to await payment until the defendants and the city litigated the matter at issue between them, there being no averment in the affidavit that the city had wrongfully stopped the work and withheld payment; and that in the absence of such an averment the inference arose that there had been a default on the part of the defendants. An affidavit of defense is sufficient when it fairly meets the case set up by the plaintiff by a specific statement of facts which make out a priina facie defense. The plaintiff’s claim was met by a denial that payments were to be made on monthly estimates and by the averment of an agreement as to the time of payment by which nothing was due for work done after April 29,1905. This was sufficient to prevent judgment for the balance of the claim. The defendants were not required to aver that they had fully complied with their contract with the city and that the refusal of the latter to pay was unwarranted. The withholding of payment by the city gave rise to no inference of a default on their part. It may have been for a good reason or for a bad one. There was no presumption either way.

The judgment is reversed and set aside, and it is directed that judgment be entered in the common pleas for the amount of the first item of the plaintiff’s claim, $2,270.60, with leave to the plaintiff to proceed for the balance.

The decision of the court on this appeal makes the question presented by appeal No. 60 of the same term unimportant and the appeal is dismissed.


text:
    Miller, Appellant, v. Harvey.

      Trespass — Conspiracy—Evidence—School law.

    In an action by a public school teacher against the president of a board of school directors to recover damages for the loss of plaintiff’s position in a school as the result of an alleged unlawful conspiracy of defendant with others, the plaintiff cannot recover where it appears from her own testimony that charges against her were made by teachers in the school to the defendant in his official capacity as president of the school board, that after investigation he communicated these charges to other members .of the board, and with them made further investigations, and acting together, the directors requested plaintiff's resignation.
    Argued March 23, 1906.
    April 30, 1906 :
    Appeal, No. 21, Jan. T., 1906, by plaintiff, from judgment of C. P. No. 5, Phila. Co., March T., 1902, No. 1,571, for defendant non obstante veredicto in case of Anna Bell Miller v. Charles H. Harvey.
    Before Mitchell, C. J., Fell, Brown, Mestrezat and Stewart, JJ.
    Affirmed.
    Trespass to recovery damages for alleged unlawful conspiracy to injure plaintiff. Before Ralston, J.
    The opinion of the Supreme Court sufficiently states the case.
    Verdict for plaintiff for $14,960. The court subsequently entered judgment for defendant non obstante veredicto.

      Error assigned was in entering judgment for defendant non obstante veredicto.

      Anna B. Miller, P. P.

      Ulysses S. Koons, with him Henry E. Lallou, Jr., and W. H. Or. Gould, for appellee. . '
   Opinion by

Mr. Justice Fell,

This action is based on the allegation of a conspiracy to injure the plaintiff’s reputation and to deprive her of her means of livelihood. It is alleged in the declaration that the defendant was the president of a board of school directors who had charge of a public school of which the plaintiff was the supervising principal, and that he unlawfully conspired with others to deprive her of her situation in the school by means of false accusations affecting her personal and professional reputation. The learned trial judge was of opinion that there was not sufficient evidence to warrant a recovery by the plaintiff, but submitted the case to the jury and reserved for more careful consideration than could be given it at the trial the question whether there was any evidence that would entitle the plaintiff to recover. Judgment was entered by the court in banc for the defendant non obstante veredicto.

The only conclusion possible from the testimony is that the action of the court in entering judgment for the defendant was free from error. The plaintiff did not sustain her action. It was established by her own testimony that the charges against her were made by teachers in the school to the defendant in his official capacity as president of the school board, that after investigation he communicated these charges to other members of the board and with them made further investigations, and acting together the directors requested her resignation. The truth of these charges was not in issue at the trial, and whether they were true or false is wholly unimportant to the decision of the question raised. The plaintiff’s case could not be made out by proof that they were false without the further proof that the defendant conspired to originate or circulate them with a knowledge of their falsity. The defendant did not originate these charges; they were brought to him under circumstances that made it his imperative duty to communicate them to his fellow members of the board and to investigate them. There is not the slightest evidence that in doing these things he acted in collusion with anyone or in bad faith. If in the course of the investigation there was injustice done the plaintiff in not giving her a full hearing, for this or for errors of judgment in reaching a conclusion the defendant is not answerable. If there was an actionable wrong done the plaintiff, it was done by those who originated the charges and brought them to the defendant.

The judgment is affirmed.