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It is further alleged in the answer: "That said cause (the former action) was submitted to the jury and the said note in this action sued on was * * * offered in evidence, both as a cause of action and ground of recovery and to reduce or defeat defendants' counterclaim thereon; that the jury in the determination of the question of indebtedness * * considered the note sued on in this action, and in arriving at their verdict charged Boss with the full amount thereof and allowed Crum the full amount of said note."

A judgment is only conclusive on the matters which are directly in issue and not those which are brought incidentally into a controversy during a trial. 1 Greenleaf's Ev., § 528. Ordinarily the pleadings in a case constitute, make, define and limit the matters in issue. Allen v. Newberry, 8 Iowa 65.

If under the pleadings in the former action the plaintiff could not obtain judgment on the note if introduced in evidence and the proof entitled him thereto, it would seem necessarily to follow that no judgment could be rendered which would bar his right of action thereafter. It is wholly inmaterial what the jury did, whether they allowed, disallowed or considered the note in arriving at their verdict.

The only question is, did the note sued on constitute an issue in the former action. If the rule be established that the action taken by a jury determines what has been adjudicated, much uncertainty must prevail! Their action, whether right or wrong, can have no effect on the question presented.

Uuder forms of pleading that existed previous to the adoption of the Code of 1851, there was a general issue under which evidence could be introduced. It was always competent for the parties, under an issue of former adjudication, to prove by parol the matters, evidence had been introduced to prove which were properly before the court under the general issue, and the judgment was conclusive as to such matters. Gardner v. Buckbee, 3 Cow. 120. Where the matters in issue are involved in uncertainty by the pleadings parol evidence is admissible as to the identity of such matters. Stapleton v. King, 40 Iowa, 278. But the rule never has been extended to the introduction of evidence showing the action taken by the jury, or what matters were considered by them. To do so might tend to the contradiction of the record and this is inadmissible. If the effect sought by appellants is given to the introduction of the note as evidence, and the action of the jury alleged to have been had in reference thereto, the result would be the establishment of an issue not shown by the pleadings and if not directly contradictory, would be an addition thereto, by parol evidence. We do not believe this to be permissible.


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1. THE 43D SECTION OF THE ACT OF INCORPORATION, Concerming railroad companies (1 Wag, Stat. p. 310) rendering such companies liable in double the amount of damages to the owners of stock killed, occasioned by failure of such companies to erect and maintain fences and cattle guards along their tracks, as provided therein, is constitutional. It is penal and not compensatory in its nature, and is within the police power of the state to protect the lives and safety of passengers. The penalty imposed for a non-compliance by such companies, with the reg ulation requir ing such fences, is a matter of legislative discretion, and may be given to the owner of the stock injured or killed.

2. THE PROVISIONS OF THE CONSTITUTION OF 1875, (Art. 5, Sec. 9), requiring forfeitures and penalties to go to the school fund, only applies to such forfeitures and penalties as accrue to the state by virtue of statutory law, and it does not inhibit the legislature from giving such penalties to private individuals.

3. WERE THE TRANSCRIPT OF THE JUSTICE, or statement filed, fails to show jurisdiction of subject-matter (that stock was killed in the township in which suit was brought), the objection may be made for the first time in the appellate court.

HOUGH, J., delivered the opinion of the court:

This was an action, under the 43d section of the railroad act, for double damages, for stock killed in consequence of the failure of the railroad company to erect and maintain fences as provided by law. The plaintiff had judgment, and the defendant has appealed. The defendant contends, that so much of the 43d section as entitles the plaintiff to double damages, is unconstitutional, whether the statute be considered as compensatory or penal in its nature. If it be regarded as compensatory only, it is argued that it is unconstitutional, in that it gives the party injured twice the amount of all damages sustained by him, and thus transfers the property of one man to another as a gratuity, and not in the redress of any injury. If it be penal, it is claimed that it is unconstitutional, in that the penalty is given to the person injured, and not to the school fund.

It is manifest that if the statute can be maintained at all, it must be maintained upon the ground that it is a penal statute. Parties civilly injured, are by way of recompense entitled only to full and adequate compensation for all the damages sustained by them, and an act of the legislature which should provide, that in all civil actions the plaintiff should receive twice the amount of the damages actually sustained by him, would undoubtedly be

declared to be unconstitutional and void. The statute under consideration is unquestionably a penal statute. It was so regarded by this court in the case of Gorman v. P. K. R. 26 Mo. 450, when single damages only were recoverable under its provisions. In Price v. Hannibal & St. Joseph R. R. 49 Mo. 440, it was said: "While the protection of the property of adjacent proprietors is an incidental object of the statute, its main and leading one is the protection of the travelling public. To insure such protection, railroads are imperatively required to fence their tracks, and the penal liability deemed necessary to enforce this requirement is a matter of legislative discretion." A critical examination of the case of Hudson v. St. L., K. C. & N. R. R. 53 Mo. 536, will show that the sum to be recovered under this section was there regarded as a penalty. The same may be said of the cases of Seaton v. Chicago R. I. & P. R. R. Co. 55 Mo. 416, and Parish v. M K. & T. Ry, 63 Mo. 286. In the last two cases, it is true, it was said that the statute was both penal and compensatory; but it is evident that the word "compensatory" was only used to convey the idea that the party aggrieved was the person authorized to sue for and recover the penalty, and thus received compensation for his loss. The act in question was chiefly intended for the protection of persons who are transported in railway carriages, and similar enactments have repeatedly been held to be a proper exercise of the police power of the state. Cooley Con. Lim. 578, and authorities cited. Being a penal statute, in the absence of any constitutional restriction, the legislature may lawfully make such disposition of the penalty imposed by it, as will, in its discretion, best subserve the purpose of the enactment. Instead of giving the whole of the penalty to the state, or county, or of dividing the penalty, and providing for a qui tam action, the whole of the penalty is given to the party aggrieved; and the method adopted is, doubtless, a most efficient one for enforcing the statute.

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It is said, however, that the 5th section of art. 9 of the constitution of 1875, prohibits the appropriation of this penalty to private uses, by requiring that all penalties shall go to the school fund. The section cited from the constitution of 1865, provides that "the net proceeds of all sales of lands and other property that may accrue to the state by escheat. or from fines, penalties and forfeitures," shall be securely invested and sacredly preserved as a public school fund, and faithfully appropriated for establishing and maintaining free schools and the university. The enactment of penal laws and the imposition of penalties for their violation, is a matter which the constitution has left to the legislature, and the constitution does not provide that all penalties imposed shall accrue to the state, nor that any shall so accrue; that matter has likewise been left to the legislature. Such penalties only as the legislature provides shall accrue to the state,are to go the school fund, under the constitution of 1865. The language of the constitution of 1875 is slightly variant from that of 1865, but its purport, we think, is substantially the It is as follows: "The clear proceeds of all penalties and forfeitures, and of all


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fines collected in the several counties, for any breach of the penal or military laws of the state, shall belong to and be securely invested, and sacredly preserved in the several counties, as a county public school fund." Penalties, forfeitures and fines collected in the several counties; that is, collected by the county authorities for the benefit of the county or the state. This section clearly refers to penalties accruing to the public, and not to penalties recovered by private persons for their own use. Since 1855 we have had a statute requiring that "all fines and penalties imposed, and all forfeitures incurred, in any county, shall be paid into the treasury th reof for the benefit of the school fund of said county." Rev. Stat. 1855, p. 452; Rev. Stat. 1865, p. 867: The statute of 1845 was substantially the same. Rev. Stat. 1845, p. 251. Since 1835, the general revenue law has contained a provision requiring the sheriffs of the several counties to collect and account for all the fines, penalties and forfeitures and other sums of money accruing to the state, or county, by virtue of any order, judgment, or decree of a court of record. These provisions were on the statute book when the constitution of 1875 was framed and adopted, and the section of that constitution above cited, clearly refers to these statutes, and will embrace such others of a similar character as the legislature may hereafter enact. That the statutes cited only include penalties accruing to the public is too plain for argument.

The case of Atchison & Nebraska R. R. v. Baty, 6 Neb. 375, 5 Cent. L. J. 431, decided by the Supreme Court of Nebraska, at its October term, 1877, we do not consider to be in point. The statute passed upon in that case, is not like ours, but gave the owner of live stock killed on a railroad track, double its value, unless the value was paid within thirty days after demand made on the company therefor. There the double damages were given, not for the violation of any criminal or penal statute passed by the legislature, in the exercise of its police power, but as a penalty imposed upon the defendant in its character as a private person for delay in making payment after demand made, and the law was therefore declared to be partial and void. It was also said to be in conflict with a constitutional provision in relation to tines and penalties. The judgment in this case must be reversed, however, for another reason. The transcript of the justice fails to show that he had jurisdiction of the subject-matter of the action, and the statement filed before the justice does not appear in the record. It must appear from the statement filed, or from the justice's transcript, that the stock were killed in the township where the suit was brought. This does not appear, and the question of jurisdiction as to the subject-matter may be raised for the first time in this court. Hazzard v. A. & P. R. R. 63 Mo. 302; Iba v. Hannibal & St. Joseph R. R. 45 Mo. 469. The judgment must, therefore, be reversed, and as it appears that a statement was filed which is not before us, we will remand the cause. All concur.



United States Circuit Court, Eastern District of Massachusetts, October 7, 1878.

Before Mr. Justice CLIFFORD, and Hon. JOHN LOWELL, District Judge.

1. CONSTRUCTION OF PLEADINGS.-Pleadings which are uncertain or ambiguous must be taken in a sense most unfavorable to the pleader. Therefore, where a bill in equity, by the assignee of a bankrupt corporation, sought to charge shareholders in respect of their shares, and alleged that there were three classes of shares fraudulently issued, but did not specify to which class the defendant's shares belonged, they were entitled to assume that their shares were of the class least open to objection.

2. FRAUDULENT Issue of SHARES-"FULLY PAIDUPSHARES"-LIABILITY OF SHAREHOLDERS.-Certain shares in a mining company were issued as fully paidup shares, in exchange for mineral lands. The lands were worth far less than the nominal value of the shares, and the transaction was clearly fraudulent. Rut it was formal and regular on its face; the books of the company showed that the shares were fully paid for; and there was nothing to apprise an innocent purchaser that such was not the fact, and nothing to put him on inquiry. Some of these shares were innocently purchased by the defendants in open market. The company becoming bankrupt, its assignee filed a bill in equity against the defendants, setting out these facts, and praying for an account of the extent to which their shares of stock had been paid for, and the manner of payment. It was held that the bill must be dismissed. "Innocent purchasers of shares are not liable in such a case, but the remedy of the corporation is against the guilty perpetrators of the fraud in their individual capacity."

Argument.-Shareholders are not required to suspect fraud, or to institute inquiries, where all seems conformable to the requirements of law and fair dealing. [Acc. Waterhouse v. Jameson, L. R. 2 Sc. App. 29.]

3. STATUTE OF LIMITATIONS-LIABILITY OF STOCKHOLDERS.-The limitation of two years of the Bankrupt Act, within which time the assignee must bring suit against any person "claiming an adverse interest touching any property or rights of property transferaable to, or vested in such assignee;" (R. S., § 5057) applies to a suit in equity brought by the assignee of a bankrupt corporation to charge its shareholders on account of money due for the payment of their shares of stock, and the statute begins to run from the date of the assignment, and not from the date when the bankrupt court makes the assessment.

Mr. Justice CLIFFORD:

Fraud does not render a contract void, but voidable only at the option of the party defrauded, both at law and in equity, whether the fraud was committed by one of the contracting persons upon the other, or by both upon persons not parties to the transaction, the rule being that where the fraud was committed by one of the parties upon the other, the contract remains operative and in force until it is disaffirmed

by the injured party. Chitty on Cont. (10th ed.), 626. Addison on Cont. (17th Ed.), 228; Clough v. Railway, L. R., 7 Ex. 34; Jones v. Carter, 15 M. & W. 724; Upton v. Englehart, 3 Dill. 496.

Sufficient appears to show that the complainant is the asignee in bankruptcy of the Central Coal Mining Company, and that the respondents are the owners of certain shares in the capital stock of that company. Atterapt is made by the bill of complaint to compel the respondents holding such shares to pay certain sums alleged to be due for the non-payment in full of the amount of the capital of the company represented by such shares. From the bill of complaint, it also appears that the corporation was organized with a capital of four hundred thousand dollars, divided into shares of one hundred dollars each, and that certain persons named, five in number, none of whom are made respondents in the case, became the corporators and directors of the company, and that the whole amount of the original stock was issued to those five persons, of which three hundred and fifty-three thousand seven hundred and ninety dollars in amount was issued in consideration of the conveyance to the corporation by the directors of certain coal lands, fraudulently valued at that sum as between themselves, though in fact the lands were worth only twenty or thirty per cent. of that amount, and that the remaining fortysix thousand two hundred and ten dollars of the stock was issued to the directors without consideration. Corporate authority was subsequently given to the directors to issue the bonds of the company, secured by mortgage, in the sum of one hundred thousand dollars, and to increase the capital stock in that amount. New stock for one hundred thousand dollars was accordingly issued and given, under a vote of the company, to such persons as purchased said bonds at ninety per cent. without other consideration. The directors pursuant to that vote did increase the capital stock of the company one hundred thousand dollars, and did issue certificates of shares for the same and gave them away without consideration. Shares of the capital stock of the company in due form were held by the respondents in the amounts specified in the bill of complaint. Debts to a large amount were contracted by the corporation, and on the 4th of May, 1874, the corporation was adjudged bankrupt. Nor is it questioned that the complainant is the lawful assignee of the bankrupt's estate, having duly succeeded the person who was first appointed to that place. As such assignee, he, on the 26th of April, 1877, petitioned the proper bankrupt court for a call and assessment upon the capital stock of the company to pay the debts of the corporation. Hearing was had and the court decreed that two hundred thousand dollars of the original stock remained unpaid, that nothing had been paid on the increased capital stock and that the amount, required to be raised was two hundred and eightyone thousand one hundred and twenty dollars. Pursuant to that judgment the court ordered a call and assessment on the whole capital stock, original and increased, of one hundred per cent.,

less any sum or sums that may have been paid thereon. Due and proper notice was given of that adjudication at the time it was made. What the bill of complaint prays, is for an account of the stock of each of the three issues by each respondent; how and in what manner, and to what extent the same has been paid for and that the respondents be decreed to pay the par value of the same severally held by them, less any amounts they may have paid for the same.

Respondents demur and set up two grounds of defense:-1, the statute of limitations; 2, that they are not liable to the assessment set up in the bill of complaint. Due consideration will be given to both defenses, but it will be more convenient to examine the one addressed to the merits, before considering the question whether the claim is barrred by the statute of limitations.

Considered broadly, the bill of complaint seeks to enforce from the respondents the payment of the entire capital stock of the company, or such portion of the same as may be necessary to pay the debt of the corporation, less the amount any particular holder of stock may have paid towards his shares.

Three classes of shares were issued, as plainly appears from the allegations of the bill of complaint. 1, Shares to the amount of three hundred and fifty-three thousand seven hundred and ninety dollars, fraudulently issued to the directors in payment for the mining lands which they at a greatly overvalued estimation conveyed to the corporation. 2, Unpaid shares to the amount of forty-six thousand two hundred and ten dollars, issued to the directors without any consideration. 3, Shares to the amount of one hundred thousand dollars, issued by the corporation to such persons as took an equal amount of the mortgage bonds of the corporation at ninety per cent.

Viewed in the light of these suggestions, it is plain that it is sufficient for the respondents to show that the complainant cannot sustain any claim against them as holders of the first issue of the original stock, as the bill of complaint does not charge that the respondents hold shares of any particular issue of the stock, or of either of the other issues. Such being the state of the pleading, it is open to the several respondents to assume that his stock, as charged, is wholly of the first-class of the stock which was issued to the directors in payment for the mining lands, the rule being that pleadings which are uncertain or ambiguous, must be taken in the sense most adverse to the pleader. Story's Eq. Plead. (7th Ed.), § 257; Foss v. Harbottle, 2 Hare. 503; Simpson v. Fayo, 1 Johns. & Hem. 23; Ayckbourn Ch. Prac. 113; Parker v. Nickson, 7 L. T. N. S. 461. Certificates of shares of that kind were issued to the amount of three hundred and fifty-three thousand seven hundred and ninety dollars, and nothing being alleged to the contrary, the several respondents in the controversy may properly assume that they are charged with holding shares in the capital stock of that isStock certificates of that issue were entered upon the books of the company as shares paid up in full.


Issued as these shares were to the directors in payment for the mining lands, they were, as between the grantors of the land and the directors issuing the shares, fully paid up, as the shares paid for the land, and the land conveyed paid for the shares, and all this appears upon the books of the company. Transferees of the shares took the certificates with nothing on their face to show any unfairness and with nothing appearing on the books of the company to put them upon inquiry. Suppose that is so, still the complainant contends that such payment was made in mineral lands at a fraudulent valuation not binding on the corporation. Admit that, and still the fact remains that the land was actually received by the company in full payment for the stock, and that the shares were issued and delivered as fully paid up shares. Taken as a whole, the averments of the bill of complaint show that the transaction in purchasing the mineral land and issuing the first class of stock in payment for the same, was a gross fraud upon the company which cannot be sustained, but it does not follow that the present suit against the respondents is the proper remedy to redress the injury, for the reason that the contract was duly executed by the execution of the deed of conveyance to the corporation, and by issuing full paid up shares to the corporation for the whole amount of the agreed consideration of the mineral land. Nothing can be plainer in legal decision than that the title to the mineral land passed to the corporation, and that the title to the paid up shares passed to the directors. Formally executed as the contract was, it must stand until it shall be rescinded, or the assignee, if he prefers that course, may retain what the company received for the stock, and seek redress in damages against those who defrauded the corporation. Ample redress is at his command, but he certainly cannot be allowed to disaffirm the contract only in part, and affirm it as to the residue, as he must do in order to maintain the present suit against the respondents.

Beyond all question the present respondents are bona fide purchasers and holders of shares in the capital stock of the company, which the books of the company show were fully paid for by the directors, and which, by the terms of the contract between the directors and the grantors of the mineral land, were fully paid in the manner stipulated by the contract. Under such circumstances it cannot be that the complainant, without disaffirming the contract, can be allowed to set up the theory that the property taken in payment of the shares was less than their estimated value, and to seek redress for the difference against bona fide purchasers of the same in the open market. Gross fraud may have been perpetrated between the parties to the sale and purchase of the mineral land, but it is nevertheless true, so far as the shares of the capital stock are involved, that the shares, as between the corporation and innocent purchasers of the stock in open market, without notice, knowledge, or means of knowledge of the fraud, were paid up, as shown by the books of the corporation. Notice of the fraud, as respects the respondents, is not alleged, nor is there an intimation in the bill of complaint that any facts or circumstances were

known to the respondents to put them upon inquiry in respect to any such imputation. Innocent purchasers of the stock in the open market are not liable in such a case, but the remedy of the corporation is against the guilty perpetrators of the fraud in their individual capacity. Support to the opposite theory is attempted to be derived from the adjudication of the bankrupt court, but the decree of the bankrupt court only adjudicates that for the purpose of paying off the indebtedness of the company a call and assessment be made on the stock of one hundred per cent., less any sum or sums that may have been paid thereon.

Properly considered as a whole, the decree of the bankrupt court does not absolutely fix and determine the amount to be assessed. Instead of that it merely calls for one hundred per cent., less all payments. Nor does the decree in any respect contradict the theory that the class of stock first issued was fully paid up before it was put upon the market; and, if so, the court is of the opinion that the proper remedy of the complainant is against the perpetrators of the alleged fraud, which he might have enforced the moment he was appointed assignee of the bankrupt's estate. Holders of shares issued improperly stand on a different footing from the holders of shares which the company had no power to issue, as the purchaser in the latter case acquires nothing, and cannot in general be held as a contributory. Lindley on Part. (3d ed.) 1381; Bank v. Alison, L. R., 6 C. P. 54; s. C., Id. 222. But the mere fact that a person has become a shareholder pursuant to a scheme which is ultra vires, will not relieve him from liability as a contributory, if the shares he has taken can be considered as legally existing, and he was himself a party to the scheme, or had knowledge of the fraud. Even where the shares were fraudulently issued, it is necessary to give strict attention to the precise facts, in order to ascertain what are the rights of the parties.

In this case the respondents were not subscribers to the stock, but the purchasers of the shares in the open market as paid up shares. It was held in Carling's case that where the contract was to take paid up shares the court could not convert the contract into one for unpaid shares, for reasons which are obviously sound and correct. Carling's case, L. R., 1 Ch. Div. 124. Where there is a contract, even if fraud be imputed, the party seeking redress must disaffirm the contract, or proceed for damages against the perpetrators of the fraud. Such a party must throw over the agreement altogether, or he must take it as a whole. He cannot adopt it as to one part and reject it as to the rest. De Ruvigne's case, L. R., 5 Ch. Div. 323. Certain shares of capital stock were allotted as fully paid up shares, and the court held that as the shares had been allotted to a stranger as paid up shares they could not be considered otherwise, and that neither he nor his alienees could be liable to contribute in respect of the shares. Ex parte Currie, 7 L. T. N. S. 486.

Argument to show that the transaction of issuing the stock in payment for the mineral land would have been valid if unmixed with fraud, is scarcely necessary, as the proposition is one which

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finds support in the daily transactions of life. Shargo's case, L. R. 8 Ch. App., 413. Shareholders are not required to suspect fraud, or to institute inquiries where all seems fair and comformable to the requirement of law and fair dealing. Waterhouse v. Jameson, L. R., 2 Sc. App. 29. Where certificates of shares were issued as fully paid up, when in fact no payment had been made, it was held in the Chancery Court of Appeal, reversing the vice-chancellor, that by the issue of the certificates the company were estopped from alleging that they were not paid up, and that an innocent holder of the shares could not be placed on the list of contributories in respect to such shares as unpaid shares. Nichols' case, 26 W. R. 334. Three of the judges gave opinions. The Master of the Rolls: When you have a receipt given you by the company, a final receipt, as a certificate of payment, what more is a bona fide purchaser to ask for, and what occasion has he to make inquiry. He has the representation of the company by the certificate that the shares are fully paid up. It appears to me the company, having made that representation by the certificate, to be used by the vendor as evidence of title, is estopped from saying afterwards that he company has not received the money. It appears to me impossible that the company should be allowed to say the shares were not paid up in due course. James, L. J. Every person connected with the company who issues a certificate for paid up shares in money, when the money has not been paid, is guilty of a personal wrong towards the company, and may be made answerable for it in exactly the same way and to the same extent as if the money had been taken out of the coffers of the company to pay up the shares, or, as if, by some fraud of the directors and officers, receipts had been given for the payment when payment had not been made. If any person is a party to such a breach he can be made answerable for it, but that cannot affect the position of one who says you made a representation to me, and you are bound by every principle of law and equity to make good the representation upon the faith of which I was induced to act. Thesiger, L. J., held that any such shareholder may show either that the shares have been paid up in fact, or that the company whom the liquidator represents have, by their words or conduct, estopped themselves from disputing that the shares have been so in fact paid up. Certificates of shares in due form were issued as paid up shares, and there is much reason to hold that the corporation, as to innocent holders of the same, is estopped to set up the defense that they are void. They admit that the shares were paid up to the extent of fifty per cent., and the proceedings of the bankrupt court contains a finding of the same import, which strengthens the proposition that the corporation is estopped to set up the defense that the certificates are void. Roche v. Railway, L. R., 9 Ex. 264. Power to issue shares was possessed by the company, and hence the rule that a holder takes nothing where the power is entirely wanting does not apply. Ferguson v. Landram, 5 Bush. 236; Stace and Worth's case, L.

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