Neuse River Navigation Co. v. Commissioners of Newbern, 52 N.C. 275, 7 Jones 275 (1859)

Dec. 1859 · Supreme Court of North Carolina

52 N.C. 275, 7 Jones 275

NEUSE RIVER NAVIGATION COMPANY v. THE COMMISSIONERS OF NEWBERN.

Where an act of Assembly authorised a corporation to take stock in a public enterprise, to a certain amount, and the only means provided for raising the money, was by issuing bonds, and the amount of the bonds to be issued, was restricted to the amount of the stock to be taken, it was Held that that these bonds could not be sold for a price less than par.

A corporation can take nothing in payment of stock subscribed, except money, unless by express provision of its charter.

Where the authorities of an incorporated town were authorised by act of Assembly, to subscribe for stock in a navigation company, and to pay for the same by the sale of their bonds, to be issued on certain terms, and such subscription was made; to a mandamus to compel the payment of the money, it was Held to be a sufficient return by the defendants, that they had prepared and executed the bonds, and had offered the same for sale by public advertisement, and had diligently endeavored otherwise to effect a sale thereof, on the terms prescribed by the acts of Assembly, and had not been able to sell them.

Tins was a petition for a peremptory mandamus, beard before Siiepiierd, J., at Spring Term, 1859, of Craven Superior Court.

The petition sets out an Act of Assembly incorporating the Neuse River Navigation Company, and also an act amending its charter, and authorising the company to increase their capital stock to an amount not exceeding four hundred thousand dollars. It then sets out an act incorporating the town of Newbern, and providing for the election of commissioners by the freemen of said town, and provides that when so chosen and qualified agreeably to said act, they shall be a body politic, by the name of “The Commissioners of Newbern,” and, by that name, to have perpetual succession by election of the freemen of the town. It next recites an act of Assembly passed on the 22d of December, 1852, entitled “an act to enlarge the powers of the commissioners of the town of Newbern.” This enacts, among other things, “ that it shall and may he lawful for the commissioners of the town of Newbern to subscribe for five hundred shares of the capital stock of tbe Neuse River Navigation Company, to be held by the commissioners of the town of Newbern, for the use and benefit of said town.” By the second section of said act, it is enacted, “ that to enable the commissioners of the town of Newbern to meet the payments which may be required by the Neuse River Navigation Company, on the stock subscribed for by virtue of said act, the said commissioners are authorised and empowered, from time to time, or at such time or times as to them shall seem fit, to make, execute and deliver their bonds for the payment of such sums of money as they may think proper, in the aggregate, not exceeding fifty thousand dollars, which bonds shall be signed by the intendant of police for said town, and sealed with the corporate seal of said corporation, shall be payable not less than ten nor more than twenty years from the time of their respective dates — shall severally be for sums not less than five hundred, nor more than ten thousand dollars, and shall bear interest at a rate not exceeding six per cent, per an.num, to be paid annually; that the owners or holders of said bonds shall not be required to include the interest accruing thereon in the list of taxable property, and that such bonds or interest, shall not be subject to any tax whatever; and to provide for the payment of the interest on these bonds, as the same may become due, and raise a sinking fund for the discharge of the bonds when they should become due, the commissioners are authorised, from year to year, to levy and collect from the real estate within the limits of the said town, such an amount of taxes, in addition to those required for other purposes, as will be sufficient for this.”

Said amendments were duly accepted by said corporation, and, on the 13th of July, 1851, at a regular meeting of the commissioners of Newbern, they passed a resolution which was regularly entered upon the books of the corporation in the following words: “Resolved, That we, the commissioners of Newbern, by virtue of the power and authority'- vested in us, by an act of the General Assembly, passed on the 22d day of December, A. D. 1852, entitled an act to enlarge the powers of the commissioners of the town of-Newbern, will subscribe for five hundred shares of the capital stock of the Neuse River Navigation -Company, to bo held by the commissioners of Newbern for the use and benefit of the said town, and the iniendantof the said town, John D. Whitford, is hereby authorised and appointed to make said subscription in the name of the commissioners of Newbern, and that the said intendant be furnished by the clerk to the commissioners of Newbern, with a copy of this resolution, under the seal of said corporation, as his authority to act in the premises.”

By virtue of this resolution, a subscription for five hundred shares of the said capital stock was duly made, and the Neuse River Navigation Company required, shortly thereafter, a payment of fifteen thousand dollars to be paid by said commissioners on said subscription, and at a regular meeting of said commissioners on the 81st July, 1856, they passed a resolution which was duly entered upon the books of the corporation in the following words»

“Resolved, That as the Neuse River Navigation Company has called for $15,000 of the town subscription on the books of said company, that the Intendant be, and is hereby authorised and requested to prepare bonds to that amount; which said bonds to bear date from the 31st July, 1854, and payable twenty years after dato, and that a tax of seventeen cents on ihe $100 valuation of real estate be laid, to meet the annual interest on said bonds.”

The petition further alleges that the Neuse River Navigation Company duly required and called for two assessments from the commissioners of Newbern on the capital stock subscribed for, as aforesaid, amounting, together, to the full sum of $50,000, of both of which, the said commissioners were duly notified. Thatthis money was repeatedly demanded of the said commissioners, and a frequent request made that they would fulfil their contract, under the provisions of the act, but they refuse to do so, or to lay any taxes, or to issue any bonds, under the said act in relation thereto.

In the return of the defendants, they admit these facts as stated in the petition. But, with regard to the bonds prepared by them, and for answer to the charge of having violated their contract, the defendants state in their return, “ we, commissioners do further return and certify that the then commissioners of the said town, did offer the said bonds for sale, did by advertisements in divers newspapers, to wit, the Weekly News, a newspaper published in said town, by the space of five months, to wit, from the 30th of September, 1854, to the 1st of March, 1855, notify the public that the said bonds were made, and ready to be issued to purchasers, and did invite any and all persons to apply for and become purchasers thereof, and did also send out agents into different parts of the country, to wit, the then president of the Navigation Company and others, to endeavor to procure purchasers for the said bonds, and did otherwise faithfully and diligently endeavor to make sale of said bonds during the time aforesaid and after-wards ; these efforts notwithstanding, no persons did or would purchase the said bonds or any of them; and so, in'fact, as we the said commissioners do return and certify, the said bonds were not issued, because no one would purchase .them, and for no other reason.”

It is further stated in the return, that at a meeting of the stockholders of the Neuse River Navigation .Company, held on the 14th day of August, 1854, a resolution was passed, which, after reciting in the preamble that the stockholders had learned that it was the intention of the president and directors of the company to accept the bonds of the town of Newbern, in payment of the stock subscribed for, by said town, proceeds to characterise such a proceeding as illegal and unjust lo the other stockholders, who were required to pay their instalments in cash, and it further declares that the president and directors have no authority thus to compound for the payment of the stock, and it expressly requires that all payments must be made in cash.

Upon this return being made, the counsel for the petitioners moved to quash the said return. The Court, after argument and inspection of the return, declared the same insufficient, and allowed the motion ; and thereupon ordered the peremptory mandamus to issue. Defendant appealed to this Court.

Donnell. McRae, and Haughton, for petitioners.

Badger, J. W. Bryan, Green, Winston, and Stevenson, for defendants.

Pearson, C. J.

Where an individual subscribes for stock or otherwise contracts a debt, it is no reply to an action, for him to say he is unable to raise the money! In regard to a municipal corporation, other considerations are presented, and the question may be a very different one, by reason of its known limited capacity. A corporation has no power to subscribe for stock, or to raise money to pay the subscription, except the power expressly given by its charter; consequently, the subscription is made, and is presumed to be accepted with direct reference to this state of things, and if the money, to pay the instalment, cannot be raised by the means authorised by the charter, owing to the restrictions imposed after a diligent and honest effort to do so, the corporation is in no legal default, because the failure originates in a want of capacity, which was known to both of the contracting parties, and subject to which the subscription was made by one and accepted by the other party. This qualified power to raise funds might have been a very proper ground for refusing to accept the subscription, but it can furnish no just ground of complaint, although,' from unexpected circumstances, it turns out that the power cannot be made available.

The present case presents this question, does the charter restrict the power to issue bonds so that none can be issued except at par? This Court is of opinion that such is the proper construction. The amount of stock to be subscribed for, (500 shares,) is $50,000. The only means of raising money to meet the payment, is by issuing bonds, and this power is expressly restricted, “not exceeding $50,000.” As the amount of the bonds is not to exceed the amount to be raised, of course the bonds cannot be issued exeept at par, and indeed an expecta- ■ tion is fairly to be implied that, possibly, as the bonds were not to be subject to taxation by the State, and the interest was payable annually, to be secured by town taxes, and the stock in the navigation company, together with all dividends, after paying the interest, was to constitute a sinking fund, for the ultimate discharge of the principal, the bonds, thus secured, might command a premium, so as to make it unnecessary to issue the full amount; at all events, that amount was not to be exceeded, and there is nothing to support the construction that the bonds were to be issued if they would only realise, say fifty cents in the dollar, whereby one half of the stock would be unpaid for, and a debt of fifty thousands dollars incurred, and then the stock be forfeited and sold for the balance due of subscription, leaving the town, minus fifty thousand dollars, and the bond-holders deprived of the collateral security of the stock, and with nothing to look to but faxes on the town, to be imposed by the citizens themselves, or if their public virtue could not stand that test, then to be coerced by peremptory writs of mandamus, from time to time. The suggestion, that the plaintiff will receive the bonds of the defendant at par, i. e. in payment of the subscription is met in two ways. It is set out in the return which, as there is no traverse, must be taken as true, that the Neuse River Navigation Company had taken this subject into consideration, and refused to allow their president and directors to accept the bonds of the defendant at par. Rut the main objection to it is, that the plaintiff, like the defendant, is a corporation of limited powers, and is not authorised to accept in payment of subscription of stock any thing but money — dollar for dollar, and it is well that it should be so; for, in those charters where power is expressly given to receive work and materials in payment of subscriptions, we believe experience has shown, that the company is always subjected to much loss and inconvenience.

As there is no traverse, the allegations of facts set out in the return, are taken to be true, and this Court is of opinion that the return was sufficient. The judgment of the Court below, directing a peremptory mandamus to issue, will be reversed, and judgment entered in favor of defendant.

It may be proper to add, that the counsel of the defendants having waived objections to form, in order to put the case on its merits, we have not considered the variance between the prayer of the petition for the writ, and the writ.— One is “to pay the money,” the other to “issue the bonds.”

Per Curiam,

Judgment reversed.