1. The statute of Indiana, passed February 23, 1853, which
authorizes connecting railroad corporations to merge and
consolidate their stock and make one joint company of the roads
thus connected causes, when the consolidation is effected -- as is
declared by the supreme court of the state in
McMahon v.
Morrison, 16 Ind. 172 -- a dissolution of the previous
companies, and creates a new corporation with new liabilities
derived from those which have passed out of existence. Hence, where
the declaration avers that the defendant had agreed that stock of a
particular railroad in Indiana should be worth a certain price at a
certain time and in a certain place, and the plea sets up that
under the above mentioned statute of February 23, 1853, the stock
of the railway named was merged and consolidated
by the consent
of the party suing, with a second railway named, so forming
"one joint stock company of the said two corporations" under a
corporate name stated, such plea is good, though it does not aver
that the consolidation was done without the consent of the
defendants. And a replication which tenders issue upon the
destruction of the first company and upon the fact that its stock
is destroyed, rendered worthless, and of no value traverses a
conclusion of law and is bad.
2. Such a plea as that just mentioned contains two points, and
two points only, which the plaintiff can traverse -- the fact of
consolidation and the fact of consent -- and these must be denied
separately. If denied together, the replication is double, and
bad.
3. When a plaintiff replies to a plea, and his replication,
being demurred to, is held to be insufficient, and he withdraws
that replication and substitutes a new one -- the substituted one
being complete in itself, not referring to or making part of the
one which preceded -- he waives the right
Page 68 U. S. 26
to question in this Court the decision of the court below on the
sufficiency of what he had first replied. The same is true when he
abandons a second replication, and with leave of the court files a
third and last one.
4. On demurrer to any of the pleadings which are in bar of the
action, the judgment for either party is the same as it would have
been on an issue in fact joined upon the same pleading and found in
favor of the same party, and judgment of
nil capiat should
be entered notwithstanding there may be also one or more issues of
fact, because, upon the whole, it appears that the plaintiff had no
cause of action. This rule of pleading declared and applied.
Under the provisions of a statute of Indiana passed May 11,
1852, for the
incorporation of railroads, the Cincinnati,
Cambridge & Chicago Short Line Railway Company -- frequently
entitled throughout the case, for brevity, "The Short Line Railway"
-- was created and made a "corporation" in that state. [
Footnote 1] This act contained no
provision by which any railroad company incorporated under it could
consolidate its stock with the stock of any other corporation. In
February of the year following, however, the legislature did pass
an act [
Footnote 2] allowing
any railway that had been organized, to intersect with any other
road, and to merge and consolidate their stock; an act whose
privileges, on the 4th of the month following, were extended to
railroad companies which should afterwards be organized. The
language of the act was:
"Such railroad companies are authorized to merge and consolidate
the stock of the respective companies,
making ONE JOINT STOCK
COMPANY of the two railroads thus connected."
With these statutes in force, Clearwater, on the 12th
July, 1853, sold a tract of land to Meredith and others for
$10,000, taking 200 shares of the already mentioned Short Line
Railway Company's stock in payment; Meredith and they, however, by
written contract, guaranteeing to Clearwater, that the stock should
be worth par -- that is to say, $50 a share -- in Cincinnati, on
the 1st October, 1855.
The 1st October, 1855, having arrived and passed, and
Clearwater, considering that the stock was not worth par at
Cincinnati, brought assumpsit in the Circuit Court for the
Page 68 U. S. 27
Indiana District, against Meredith and his co-guarantors, on the
contract. The declaration set forth the sale, acceptance of the
stock, and guaranty; that Clearwater still held possession of the
stock; and it assigned for breach, that the stock was not worth par
at the time and place stipulated, but on the contrary, was of no
value at all.
To this declaration there were six pleas. Issues, in fact, were
joined on the first and fourth, and demurrers sustained to the
second, third, and sixth.
The fifth plea set forth substantially, that after the execution
of the guaranty, and before the 1st of October, 1855, to-wit
&c., the stock of the said Short Line Railway was merged and
consolidated with the stock of a second railway company named;
[
Footnote 3] making one joint
stock company of the two, under a new corporate name, which was
given; [
Footnote 4] that the
said corporations were organized and formed under the already
mentioned act of May 11, 1852, to provide for the incorporation of
railroad companies; that the roads were connecting and intersecting
roads; that the
consolidation was made with the consent of
the stockholders and directors of both companies; that afterwards,
in August, 1854, the said newly formed joint company was merged and
consolidated with a
third railway corporation of the State
of Indiana, whose name was also given; [
Footnote 5] which company was constructing a road that
intersected with the said already mentioned newly formed joint
company; that by the said consolidation, the stock of the said two
companies was merged and consolidated, "forming
one joint stock
company out of said two companies;" that the said
consolidation was made with the consent of the directors and
stockholders of said two companies,
and with the consent of
said plaintiff; that the said consolidated company assumed a
third corporate name, which was stated; [
Footnote 6] and that,
by reason of the said
consolidation, the stock of the Short Line Railway Company in
said agreement specified, was destroyed,
Page 68 U. S. 28
and rendered wholly worthless and of no value. A demurrer was
interposed to this plea, which was overruled.
Then the plaintiff filed a replication. To this a demurrer was
put in by the other side, and the court having sustained it, an
amended or rather a substituted replication was put in. To this a
demurrer was also sustained. Whereupon, on motion and by leave of
the court, the plaintiff withdrew his joinder in demurrer, and
filed the following second amended replication:
"And the plaintiff, as to the plea of the defendants fifthly
above pleaded, says that he ought not, by reason of anything
therein alleged, to be debarred or precluded from having and
maintaining his aforesaid action against the defendants, because he
says that the said stock of the Cincinnati, Cambridge & Chicago
Short Line Railway Company
was not destroyed, either in whole
or in part, nor was the same rendered worthless and of no value, in
manner and form as the defendants by their said plea have
alleged. And this he prays may be inquired of by the
country."
This replication was also demurred to, and the demurrer
sustained. The plaintiff now saying nothing further, and choosing
to abide by his last-named amended replication, judgment was
rendered for the defendant.
The question presented on error here was this: did the court
below commit error when it sustained a demurrer to the last
replication, and gave judgment against the plaintiff, Clearwater,
as it did?
Page 68 U. S. 38
MR. JUSTICE DAVIS, after stating the case, delivered the opinion
of the Court:
In order to arrive at a correct solution of this question, it is
important to consider whether the plea is a good one, for a
demurrer, whenever interposed, reaches back through the whole
record, and "seizes hold of the first defective pleading." The plea
in controversy confesses the original cause of action, but sets up
matter, which has arisen subsequent to it, to avoid the obligation
to perform it. It acknowledges that the guaranty was given as
claimed, but insists that the consolidation of the interests and
stock of the three railroad companies necessarily destroyed and
rendered worthless and of no value the guaranteed stock, and that
Clearwater having consented to the transfer, is in no position to
claim redress from Meredith and his co-defendants.
Page 68 U. S. 39
If Clearwater was a consenting party to a proceeding which, of
itself, put it out of the power of the defendants to perform their
contract, he cannot recover, for
"promisors will be discharged from all liability when the
nonperformance of their obligation is caused by the act or the
fault of the other contracting party. [
Footnote 7]"
The Cincinnati, Cambridge & Chicago Short Line Railway
Company, whose stock was guaranteed, was, as stated in the
pleadings, organized under a general act of the State of Indiana,
providing for the incorporation of railroad companies. This act was
passed May 11, 1852, and contained no provision permitting railroad
corporations to consolidate their stock. It can readily be seen
that the interests of the public, as well as the perfection of the
railway system, called for the exercise of a power by which
different lines of road could be united. Accordingly, on the 23d
February, 1853, the General Assembly of Indiana passed an act
allowing any railway company that had been organized, to intersect
and unite their road with any other road constructed or in progress
of construction, and to merge and consolidate their stock, and on
the 4th of March, 1853, the privileges of the act were extended to
railroad companies that should afterwards be organized.
The power of the legislature to confer such authority cannot be
questioned, and without the authority, railroad corporations
organized separately, could not merge and consolidate their
interests. But in conferring the authority, the legislature never
intended to compel a dissenting stockholder to transfer his
interest, because a majority of the stockholders consented to the
consolidation. Even if the legislature had manifested an obvious
purpose to do so, the act would have been illegal, for it would
have impaired the obligation of a contract. There was no
reservation of power in the act under which the Cincinnati,
Cambridge & Chicago Short Line Railway was organized, which
gave authority to make material changes in the purposes for which
the corporation was created, and without such a reservation, in no
event could a dissenting stockholder be bound.
Page 68 U. S. 40
When any person takes stock in a railroad corporation, he has
entered into a contract with the company that his interests shall
be subject to the direction and control of the proper authorities
of the corporation to accomplish the object for which the company
was organized. He does not agree that the improvement to which he
subscribed should be changed in its purposes and character at the
will and pleasure of a majority of the stockholders so that new
responsibilities, and it may be, new hazards, are added to the
original undertaking. He may be very willing to embark in one
enterprise and unwilling to engage in another; to assist in
building a short line railway, and averse to risking his money in
one having a longer line of transit.
But it is not every unimportant change which would work a
dissolution of the contract. It must be such a change that a new
and different business is superadded to the original undertaking.
[
Footnote 8] The act of the
Legislature of Indiana allowing railroad corporations to merge and
consolidate their stock, was an enabling act -- was permissive, not
mandatory. It simply gave the consent of the legislature to
whatever could lawfully be done, and which without that consent
could not be done at all. By virtue of this act, the consolidations
in the plea stated were made. Clearwater,
before the
consolidation, was a stockholder in one corporation, created for a
given purpose; after it, he was a stockholder in another and
different corporation, with other privileges, powers, franchises,
and stockholders. The effect of the consolidation
"was a dissolution of the three corporations, and at the same
instant, the creation of a new corporation, with property,
liabilities, and stockholders, derived from those passing out of
existence;"
McMahan v. Morrison. [
Footnote 9] And the act of consolidation was not void
because the state assented to it, but a nonconsenting stockholder
was discharged. [
Footnote
10] Clearwater could have prevented
Page 68 U. S. 41
this consolidation had be chosen to do so; instead of that, he
gave his assent to it and merged his own stock in the new
adventure. If a majority of the stockholders of the corporation of
which he was a member had undertaken to transfer his interest
against his wish, they would have been enjoined. [
Footnote 11] There was no power to force
him to join the new corporation, and to receive stock in it on the
surrender of his stock in the old company. By his own act he has
destroyed the stock to which the guaranty attached, and made it
impossible for the defendants to perform their agreement. After the
act of consolidation the stock could not have any separate,
distinct market value. There was, in fact, no longer any stock of
the Cincinnati, Cambridge & Chicago Short Line Railway.
Meredith and his co-defendants undertook that the stock should
be at par in Cincinnati, if it maintained the same separate and
independent existence that it had when they gave their guaranty.
Their undertaking did not extend to another stock, created
afterwards, with which they had no concern, and which might be
better or worse than the one guaranteed. It is not material whether
the new stock was worth more or less than the old. It is sufficient
that it is another stock, and represented other interests.
But it is said that the plea is defective because it does not
aver that the consolidation was an act done without the consent of
the defendants. The pleadings do not aver that the defendants were
stockholders in any of the roads whose interests were merged, and
if they were not, it is not easy to see what right they had to
interpose objections to consolidation, nor how their consent was
necessary to carry out the object contemplated. If the plaintiff
consented because they did, and it is meant to be argued on that
account, they would still be liable on their contract; the answer
is that this is not a matter to be negatived by the defendants, but
the plaintiff should reply the fact. [
Footnote 12]
Page 68 U. S. 42
It follows that the fifth plea presented a complete defense in
bar of the action.
In this plea there were two points, and two only, which the
plaintiff had the right to traverse. He could deny
either
the act of consolidation, or that he gave his consent to it. He
could not deny both, for that would make his replication double.
And if either fact was untrue, the defense was destroyed. The truth
of both was essential to perfect the defense. But traverse can only
be taken on matter of fact, and it is always inadmissible to tender
an issue on mere matter of law. [
Footnote 13]
The last replication
does traverse a conclusion of law.
Whether the stock of the Cincinnati, Cambridge & Chicago Short
Line Railway Company was destroyed and rendered worthless and of no
value was not a question for a jury to try. If the roads were
consolidated with the consent of the plaintiff then it followed as
a conclusion of law that the stock was destroyed and of no value.
The stock passed out of existence the very instant the new
corporation was created. The issue, therefore, tendered by the
plaintiff in his last replication was an immaterial one, and the
court did not err in sustaining a demurrer to it.
But the plaintiff claims the right to have the decision of the
court below on the sufficiency of his previous replications
reviewed here. This he cannot do. Each replication in this cause is
complete in itself; does not refer to, and is not a part of what
precedes it, and is new pleading. When the plaintiff replied
de
novo, after a demurrer was sustained to his original
replication, he waived any right he might have had, to question the
correctness of the decision of the court on the demurrer. In like
manner he abandoned his second replication, when he availed himself
of the leave of the court, and filed a third and last one.
But the plaintiff insists that even if his replication was bad,
that still upon the whole record he was entitled to judgment,
because the first and fourth pleas were undisposed of.
Page 68 U. S. 43
If an issue in fact had been joined on the fifth plea, and found
for the defendants, judgment was inevitable for them, because the
plea was
in bar of the action, and the other pleas would
then have presented immaterial issues. If the plea was true, being
a complete defense, it would have been useless to have tried other
issues, for no matter how they might terminate, judgment must still
be for the defendants. The state of pleading leaves the fifth plea,
precisely as if traverse had been taken on a matter of fact in it,
and determined against the plaintiff.
"On demurrer to any of the pleadings which go to the action, the
judgment for either party is the same as it would have been on an
issue in fact, joined upon the same pleading and found in favor of
the same party."
Gould's Pleading, ch. ix, ยง 42.
"And when the defendants' plea goes to bar the action, if the
plaintiff demur to it and the demurrer is determined in favor of
the plea, judgment of
nil capiat should be entered,
notwithstanding there may be also one or more issues in fact,
because, upon the whole, it appears that the plaintiff had no cause
of action."
Tidd's Practice, 4th American Edition 741-742.
There is no error in the record.
Judgment affirmed with costs.
[
Footnote 1]
Revised Statutes of Indiana, ed. 1860, p. 504.
[
Footnote 2]
Act of 23d February, 1853;
ib., 526.
[
Footnote 3]
The Cincinnati, New Castle & Michigan Railroad Co.
[
Footnote 4]
The Cincinnati & Chicago Railroad Co.
[
Footnote 5]
The Cincinnati, Logansport & Chicago Railway Co.
[
Footnote 6]
The Cincinnati & Chicago Railroad Co.
[
Footnote 7]
2 Parsons on Contracts 188.
[
Footnote 8]
The Hartford &c., R. Co. v. Croswell, 5 Hill 383;
Banet v. Alton &c., R., 13 Ill. 510.
[
Footnote 9]
16 Ind. 172.
[
Footnote 10]
McCray v. Junction Railroad Co., 9
id.
358.
[
Footnote 11]
Lauman v. Lebanon Valley Railroad, 30 Pa.St. 46.
[
Footnote 12]
1 Chitty's Pleading 222.
[
Footnote 13]
1 Chitty's Pleading 645.