
    Rochester, H. & L. R. Co. v. Hartshorn et al.
    
    
      (Supreme Court, General Term, Fifth Department.
    
    October, 1888.)
    1. Eminent Domain—Compensation—Evidence—Corporations—Promoters—Conditional Subscriptions. '
    In an application by a railroad company to acquire title to land, it is improper to admit, as evidence of value, agreements by the owner with the promoters of the company to sell the right of way for a certain amount, and to subscribe for a certain number of shares, payable on certain conditions. The corporation not having ratified the contract, it was not binding on the owner; and the subscriptions, being payable on condition, were in violation of general railroad act N. T. art. 1¡ § 4, providing that no subscriber shall be received until he shall pay 10 per cent, m money on the amount subscribed.
    A Same—Evidence—Appeal—Harmless Error.
    The commissioners having admitted the void contracts in evidence, and referred to them as bearing on the question of damages, and binding on the owner, and having awarded an amount for damages nearly corresponding with the sum mentioned in the contracts, it cannot be said that they were not influenced by such contracts, and the award will be reversed.
    Appeal from special term, Monroe county.
    Application of the Rochester, Hornellsville & Lackawanna Railroad Company to acquire title to land, against Charles H, Hartshorn and others. Motion to set aside award of commissioners appointed to determine the compensation to be paid, denied, and defendants appeal. The general railroad act N". Y. art. 1, § 4, provides that no subscriber shall be received until he has paid1 10 per cent, in money on the amount subscribed.
    Argued before Barker, P. J., and Haight, Bradley and Dwight, JJ.
    
      Daniel E. Benton, for appellants. Frank S. Smith and M. Rumsey Miller, for respondent.
   Barker, P. J.

The important question presented on this appeal arises on-an exception taken by the land-owners to an item of evidencereeeived on the-hearing relative to damages. The owner of the fee of the lands is Charles H. Hartshorn, who is the son of the late Charles Hartshorn, who died intestate, and the owner of the premises in question, before the commencement of these-proceedings. The quantity of land described in the petition is 15J acres, and. the award of damages the sum of $3,190. The evidence covered by the exception is an instrument in -writing, of which the following is a copy: “How,, therefore, in consideration of such subscription, it is agreed on the part of the said company that the said Hartshorn shall be'allowed at the rate of $200' per acre for the right of way on the lands so taken from him, for the purposes of said railroad, which shall be of the width of sixtjr-six feet, and taken along the line of the N. Y., L. E. & Western Railroad.. If such Rochester, Hornellsville & Lackawanna Railroad Company shall be located on what is known as-the ‘ Eastern Route, ’ and distant from said Erie road, then said Hartshorn ' shall be relieved from said subscription, with the understanding that he shall-make such new subscription as in his judgment shall be right and proper, and not less than $2,000, or twenty shares of said stock. Dated May 26, 1886. [Signed] John McDougal, President. J. W. Hear, Secretary.” This paper was executed by the deceased, Charles Hartshorn, and before the petitioner was organized as a corporation under the general railroad act, but . the promoters of the scheme to construct and operate a railroad between the places mentioned in the articles of association had negotiations with the said deceased and Others, residents of the city of Hornellsville, with a view of securing their co-operation and pecuniary assistance in carrying out the enterprise, which resulted in a written proposition being made and signed, by tliedeceased and others, citizens of the city of Hornellsville, to the. effect that, they would, within 30 days after the completion of the proposed railroad, pay to the company so to be organized the sum of $50,000 in money, and procure-the right of way for the entire length of the road, without charge to the company, with this qualification of their offer: If the right of way should cost to exceed $10,000, then the said excess, to the amount of $15,000, should be deducted from the said sum of $50,000 which was to be paid in money. The-other terms and conditions embraced in the proposition it is unnecessary to-mention in considering this exception. This offer or proposition was accepted in writing by one of the promoters of the scheme, in behalf of himself and his-associates. Thereupon the deceased signed another instrument in writing, agreeing to subscribe for $5,000 of the capital stock of the proposed company, payable upon the performance of certain conditions inserted in the same instrument. It was at that time contemplated by the promoters of the scheme-that John McDougal and J. W. Hear, who signed the said paper so received in. evidence, would, when the company was organized, be chosen president and secretary of the same, and they were afterwards in fact elected to those positions, respectively. After the organization was completed, the road was located on the line known and mentioned in the said papers as along the line of' the “H. Y., L. E. & Western Railroad Company, ” and on and over the lands-of the said Charles Hartshorn. On the hearing before the commissioners, the-owners examined the witnesses as to the value of the lands taken, which, in the opinion of such witnesses, was largely above the sum of $200 per acre. The petitioner made no offer on the hearing that the damages might be assessed at $200 an acre, but gave evidence of the same character as that introduced by the owners; the witnesses placing the value of the lands taken to-be less than $100 per acre. The several instruments were executed about the same time, and under such circumstances that they .constituted but one instrument, and were so considered by the commissioners at the time they were received in evidence. The precise question presented by the exception is whether these papers were competent evidence on the subject of the damages; for that was the only question the commissioners were authorized by the order of their appointment to consider and determine. In offering tho instrument in writing, the counsel for the petitioner insisted that it was i* valid offer on the part of the then owner, Charles Hartshorn, to sell the land for tile sum of $200 per acre, and was binding upon the present owner, his son and only heir at law. As we read the record, the commissioners received the papers in evidence as competent proof on the question of damages, and that the same constituted a valid contract on the part of the deceased to sell and convey the right of way at the price named therein, and, so far as it related to tin- property in question, was binding upon the present owners. The rulings of the commissioners, as set forth in the record, do not sustain the position which the counsel for the petitioner now makes, that these instruments were received in evidence formally, and whether they were valid evidence for any purpose was to be afterwards passed upon, and were not, in fact, considered by the commissioners as evidence in the case. As no corporation had. been created when these instruments w-ere executed, they were null and void as to Charles Hartshorn. It takes two parties to make a contract. Therein ust be a promisor and a promisee. After the company was organized, there was never' any recognition by it, in any form or manner whatever, of the validity, or even of the existence of these instruments; nor did Mr. Harts-horn, the subscriber for the capital stock, ever pay any part of his subscription, or recognize his obligation to pay the same. The situation is precisely the same as it was on the day these papers were executed and delivered. The-petitioner, by instituting these proceedings, repudiates the proposition now made, that these instruments constituted a valid and binding agreement on, the part of the land-owner to convey the premises for the price mentioned therein; for it is averred in the petition that the company has not been able-to acquire title to the lands, for the reason that it has been unable to agree with the owner of the same as to the amount of compensation to be paid therefor, and that the owners demand a sum largely in excess of their value-All the authorities bearing upon this subject hold that preliminary negotiations for subscription to the capital stock of a railroad corporation, before the same is organized, are void, and not binding upon the subscriber, nor the company after its organization. Railroad Co. v. Gifford, 87 N. Y. 294; Railroad Co. v. Clark, 22 Hun, 359; Railroad Co. v. Tibbits, 18 Barb. 297.

The subscription was not absolute, but was conditional, and not in conformity with the provisions of the general railroad act; and for that reason, independent of the one already mentioned, was invalid. The subscription was not obligatory upon the subscribers, and the same was not payable until the railroad was completed and put in operation; and this provision was hostile to the provisions of the fourth section of the general railroad act, and rendered the same nugatory and void. Railroad Co. v. Tibbits, 18 Barb. 297; Plankroad Co. v. Griffin, 24 N. Y. 150; Turnpike Co. v. North, 1 Hill, 518. The condition imposed by the subscribers, and sanctioned by the promoters of the scheme, gave this class of subscribers an advantage over those who may have made subscriptions to the capital stock in compliance with the provisions of the general .railroad act; for such subscribers were required to pay upon the call of the board of directors. The subscription papers contained another condition, that upon paying up the stock the subscribers might, at their election, exchange the same for an equal amount of the first mortgage bonds of the company; thus making their subscription, in effect, a loan of money to the company secured by a mortgage upon its property, and the subscribers escaping loss in case the stock should prove valueless and the securities available. As these instruments, put in the form of contracts, were not such in law, nor binding upon any of the persons or parties named therein, they were incompetent as evidence for any purpose, and the exception was well taken. For this reason, we think, the award and the report should be set aside, and another hearing directed.

In proceedings of this character the strict rules of evidence, applicable to the trial of issues of fact in actions, do not in all respects apply to the effect of receiving incompetent evidence. There is good reason for supposing the commissioners were influenced in affixing the amount of damages by this evidence. The receipt of it was strenuously resisted by the land-owners, and the reason why the evidence was incompetent stated and discussed before the commissioners, before they made their ruling that the evidence was competent. After these instruments were received in evidence, they were referred to by the commissioners as contracts bearing on the question of damages, and binding on the present owner, as the successor in interest, to one of the parties executing the agreement. The amount of the award very nearly corresponds with the sum mentioned in the preliminary papers, as the price wiiich the land-owner should receive, and is a circumstance indicating that the commissioners may have acted on the supposition that they constituted a valid contract binding on the owner and his heirs at law. We cannot say that injustice has not been done to the owners by the receipt of this incompetent evidence, and are of the opinion that they are entitled to a rehearing. We do not deem it necessary to consider the other exceptions taken upon the receipt of evidence, or to the exclusions of offers of evidence; for it is not likely that those questions will again arise in the same form. The appraisal and report of the commissioners are set aside, and a new hearing awarded, before new commissioners, with the costs of this appeal to be paid by the petitioner; and the order of the Monroe county special term is reversed, without cogts to either party. All concur.  