Clearwater v. Meredith

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. 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 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 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; making one joint stock company of the two, under a new corporate name, which was given; 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; 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; and that, by reason of the said consolidation, the stock of the Short Line Railway Company in said agreement specified, was destroyed, 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?

Mr. Pugh for Clearwater, the plaintiff in error: The demurrer asserts, of course, that the replication is bad, and the reasons which will be assigned to show that it is so are, that it is double, and also that it traverses matter of law.

1. Is the replication double? It cannot be supposed that the fifth plea intended to allege the three facts stated, namely, the consolidation, the plaintiff's consent, and the destruction of the stock, as three separate matters of defence. It means that the defendants were excused from their agreement because the stock of the plaintiff had been destroyed, and that the destruction resulted from a consolidation to which the plaintiff had consented. Now all three facts constitute (together) but a single point of defence; and that point, including all its elements, the plaintiff, by settled rule of pleading, had a right to put in issue. Sergeant Stephen thus illustrates the rule:

'In an action of trespass for breaking the plaintiff's close and depasturing it with cattle, the defendant pleaded a right of common in the close for the said cattle, being his own commonable cattle, levant and couchant upon the premises. The plaintiff, in the replication, traversed 'that the cattle were the defendant's own cattle, and that they were levant and couchant upon the premises, and commonable cattle.' On demurrer for duplicity, it was objected that there were three distinct facts put in issue by this replication, any one of which would be sufficient by itself; but the court held that the point of the defence was that the cattle in question were entitled to common; that this point was single, though it involved the three several facts that the cattle were the defendant's own, that they were levant and couchant, and that they were commonable cattle; that the replication traversing these facts, in effect, therefore, only brought in issue the single point whether the cattle were entitled to common, and was, consequently, not open to the objection of duplicity.'

The rule itself was neatly declared by Lord Mansfield, who says: 'It is true you must take issue upon a single point, but it is not necessary that this single point should consist of a single fact.' It received application stronger than any we ask for in the late English case of Selby v. Bardons. The action was replevin. The defendants avowed the taking; Bardons as collector of the rates, and the other defendant as his bailiff. The avowry alleged that the plaintiff was an inhabitant of the parish, and ratable in respect of his occupancy of a certain tenement: it then alleged the making of a rate, publication thereof, demand of payment and refusal, summons of the plaintiff before the petty sessions, judgment against him, warrant of distress, &c. The plaintiff pleaded in bar, de injuria, &c.; to which the defendant demurred, for that the plea tendered issue of several distinct matters. But Parke, J., says:

'It is true that these pleas in bar put in issue a great number of distinct facts, and it is also true that the general rule is that where any pleading comprises several traversable facts or allegations, the whole ought not to be denied together, but one point alone disputed; and I am fully sensible that the tendency of such a rule is to simplify the trial of matters of fact, and to save much expense in litigation. But it is quite clear that from a very early period in the history of the law, an exception to this general rule has been allowed with respect to all actions of trespass on the case, in the plea of the general issue, and with respect to some actions of tort in the replication de injuria sua propria absque tali causa. This replication, where it is without doubt admissible, generally-indeed, it may be said, always-puts in issue more than one fact, and often a great number.'

Other cases illustrate the distinction.

2. Does the replication traverse matter of law? These parties did not bargain with each other upon a question of names, but upon a matter of values. Assuming the consolidated company to be a corporation-a matter which we speak of hereafter-it was the successor, in law, of the Short Line Railway, and bound by the contracts of that company as if no consolidation had occurred. So complete would be the identity, in such a case, that an action of covenant might be maintained against the new company, by name, upon a deed sealed with the corporate seal of any one of its constituent bodies. The mere fact of consolidation, therefore, with or without the plaintiff's consent, is not material to the performance of this agreement on the part of the defendants. It may be that the Short Line Railway Company acquired, by means of it, additional property, or facilities of some other description for enhancing the value of its stock. So, on the other hand, the consolidation may have involved its affairs in ruin. This, however, is a question of fact, to be tried by a jury, and upon evidence. The plaintiff took issue in regard to it; but he was not allowed any trial of that issue. And so it stands upon record, as the judgment of the Circuit Court in this case, that (although the stock of the Short Line Railway was not destroyed, 'either in whole or in part,' by means of consolidation, as alleged in the plea) the defendants are excused, nevertheless, from performing their contract.

3. But a new point arises. The question is not only as to the sufficiency of our replication. A demurrer being put on the pleadings it searches the record. The first bad piece of pleading will be laid hold of, and judgment given on it. Now does the plea to which we have replied, itself put in a sufficient defence? The fifth plea does not allege that a new 'corporation' was created by the consolidation of the Short Line Railway Company with either or both of the other companies named, but that one JOINT STOCK company was formed by union of the three. And the statute of Indiana, authorizing consolidation, uses that peculiar language. Upon the other hand, the general act of May 11th, 1852, under which as well the Short Line Railway Company as both the other companies mentioned in the plea were formed, declares that the companies formed under it shall be 'corporations' in the proper sense. These two statutes show, therefore, that the Legislature of Indiana intended to express the difference between a joint-stock company (as such) and a corporation. It is not only a difference well established, but peculiarly significant in this connection. The old corporation, therefore, was not drowned, dissolved, nor otherwise destroyed. Decisions of the Supreme Court of Indiana favor, perhaps, this view. Perkins, J., in the case of Booe v. The Junction Railroad Co., says, speaking of the point before him: