source: Caselaw Access Project

author: Slosson, J. Bosworth, J.—The Woodruff, J.—

license: Public Domain

text:
    Knapp, et al, v. The New York and Harlem Railroad Company.
    (Before Duer, Bosworth and Slosson, J. J.)
    Heard, March 2d;
    decided, Dee. 12th, 1857.
    Cary v. Same & Knapp, et al.

    (Before Bosworth and Woodruff, J. J.)
    Heard, June 11;
    decided, Dec. 12, 1857.
    Morris and others agreed, with the Harlem Railroad Company, to construct an ex tension of their road from Dover Plains to Chatham Four Corners, for certificates of indebtedness, amounting to $2,000,000, with interest warrants attached, payable out of a fund to arise from operating the extension; the surplus of its earnings, after paying its expenses, to be applied to paying the interest warrants semi-annually; and the company covenanted, that if the net earnings of the extension were not enough to pay the interest warrants, as they fell due, to “ apply the gross receipts from the business over the present road, from and to stations thereon, to and from stations on,” (the extension,) "so far as the same may be necessary for the payment of interest, to an amount not exceeding three-quarters of such gross receipts.”

      Held, that by the true meaning of the contract, (there being no net earnings of the extension, but on the contrary, the expenses of running the extension exceeded its earnings,) that the three-quarters of such gross receipts must be applied directly and solely to pay such interest warrants, and not to defray the expenses of running the extension, which its earnings were insufficient to satisfy.

      Held, also, that the facts, that the company had settled with the certificate-holders, semi-annually, during a period of some three years, on the assumption that such gross receipts, to the extent of three-quarters thereof, were to be applied with the earnings of the extension, to pay its expenses, and only the surplus thns arising was to be applied to the payment of the interest warrants, and deferred warrants were issued for the residue, was no answer to an action to have the contract enforced according to its true meaning, as the company, by thus settling, had not paid as much as it was their legal duty to pay, and had not done, or engaged to do, any other act to their prejudice.

      Held, also, that such settlements did not amount to a cotemporaneous, or continuing practical construction of the contract, by which the certificate-holders were concluded, nor one which the Court was equitably bound to adopt or enforce, as they did not appear to have been made with knowledge of the particular facts of the case, or under such circumstances as to establish that such was, in fact, their view of the actual meaning of the contract, or that such was the view of the contractors, to whom the certificates were originally issued.

      Held, also, that it was competent for the company, by an agreement between them and such contractors, made while the latter held such certificates, to become purchasers and owners of a part of such certificates, without the purchase of them by the company being treated as a satisfaction and.payment thereof, in any such sense as that the holders of the residue, of those originally issued, would he entitled to the whole fund, for the payment of the interest warrants on their certificates, if required to make an amount sufficient to satisfy the same.

      Held, also, that the company, by the true construction of the contract, were not personally liable for the payment of the certificates, and were only liable for the performance of the covenants on their part in relation to operating the extension and applying its net earnings, and doing other things, as in their contract they had covenanted and agreed to do.
    These two actions are reported together, as they were argued upon the understanding, although heard at different General Terms, that all the Judges who heard the arguments would confer with each other, before deciding either of them. They did so confer, and both actions were decided at the same time. The case of Knapp, et al., v. The Harlem R. R. Co. was commenced in December, 1855, and was tried before Bosworth, J., without a jury, in April, 1856, and now comes before the General Term, on an appeal, by the defendants, from the judgment rendered therein. The defendants are the parties of the first part, to a tripartite agreement, or trust conveyance, dated the 31st of October, 1849, and the plaintiffs are the parties thereto, of the second part, and Gouverneur Morris, George L. Schuyler and Sidney G. Miller are the parties of the third part.
    The agreement recites, that the .parties of the third part had contracted, with the parties of the first part, to construct and complete an “ extension” of the railroad of the parties of the first part, from Dover Plains, in Dutchess County, its then terminus, to Chatham Pour Corners, in Columbia County, for $2,000,000 to be paid out of a fund to be created, as in said tripartite agreement is provided. This extension is called, in the subsequent proceedings, sometimes, “the Albany Extension,” and sometimes the “ new road,” and the part previously constructed is called “ the old road,” or “present road.” By the tripartite agreement, the plaintiffs were made grantees, and trustees, of the property which was to produce such fund.
    To create such fund, the parties of the first part, when the extension was completed, were to extend the travel of their cars and engines over it, and furnish every thing necessary for that purpose. The parties of the first part were to keep full and accurate accounts, so as to show the whole expenses of running, both the old road and the new, and “ the earnings and receipts” from the new road, and “also the receipts” (of the old road) “from the business, from and to stations on” (the new road) “ to and from stations on the old road.”
    The fund, to pay interest on the cost of construction, and ultimately the principal, was to consist of “the whole receipts from all sources on the line of” (the new road), from which was to be deducted the expense of running it, and the residue was to be applied to pay interest warrants, issued in connection with certificates to represent such $2,000,000 of indebtedness, and the rights of holders thereof, to be paid such part of said $2,000,000 as the certificates expressed, and interest thereon, as stated in such certificates.
    By the tripartite agreement, the parties of the first part covenanted, that, in case it should so happen that the net earnings of the new road, as before stated, should be inadequate to the payment of interest upon the said certificates, “ that they will apply the gross receipts from the business over the present road, from and to stations thereon, to and from stations on” (the new road), “ so far as the same may be necessary for the payment of interest, to an amount not exceeding three-quarters of-the whole of such gross receipts.”
    There were no net earnings from the new road. The cost of running it exceeded the receipts from it." And the main question in this action is, whether the three-quarters of such gross receipts were to be applied, first and directly, to pay interest, or to pay, first, the cost of running the new road, leaving only the residue, remaining after paying such expenses, to be applied upon, and in payment of such interest. The plaintiffs insist on the former, and the defendants on the latter, as the true construction.
    The complaint alleges the incorporation of the defendants, and recites the act of incorporation, and the acts amending it, and states the execution of the tripartite agreement, and its provisions, according to the plaintiffs’ view of their effect and meaning; and the contract between the said parties of the first and third parts, for the construction of the extension, sets forth the terms and form of the certificates and interest warrants to be issued, and that the defendants paid the interest warrants in full, as they fell due, up to the 1st of July, 1852, (the new road having been opened on the 1st of April, 1852,) and that, since said 1st of July, only partial payments have been made on such interest warrants; and that “ deferred warrants” have been issued for such deficiency, and stating their amount. It states the amount of such “ gross receipts,” three-quarters of which were sufficient to pay interest, in full, if the plaintiffs’ construction of the tripartite agreement is correct; and that the defendants had applied so much of such gross receipts as were necessary to pay the expenses of operating the new road.
    The complaint further states: “That, by referring to the accounts from time to time, rendered to them by the defendants, the plaintiffs have ascertained that, instead of applying the said receipts to payment of said interest warrants, as by said deed required, the defendants have applied them, in the first instance, to the payment of such and so much of the running expenses of the Albany extension proper, (so callod,) calculated upon the basis in the said conveyance specified, as was the amount of the excess of such expenses over the receipts from such Albany extension proper. That the defendants allege, that at no time have the receipts, of such Albany extension proper, exceeded the amount of the expenses, as contemplated in the said instrument; and defendants claim and insist, that, under the said contract, they are justified in applying such three-quarters gross receipts in the first instance, to the supplying of deficiencies in the accounts of such Albany extension proper.”
    It also alleges, that nearly all of the certificates, representing the cost of construction, had been assigned to third persons by said Morris, Miller and Schuyler, for value, and that such assignees and holders construe the tripartite agreement as the plaintiffs do, and one of them has brought a suit in this Court, against the present plaintiffs, for an accounting and payment of the interest-warrants, and that these plaintiffs are mere trustees, and have no interest in the event of this action. It prays a judgment, construing and determining the meaning of the contract, and for relief, in accordance with the construction which the plaintiffs claim to be the true one.
    The defendants, in their answer, state, that their plan for the cost of the extension, was founded upon the value of the extentension, as a separate property, involving no liabilities on their part, except to operate it, and account for the avails of the service, as provided by the agreement.
    That it was their object, to retain the business of the old road from New York to Dover Plains, free from any liability for the expense of constructing or operating the new road. That, in order to carry out this plan, they entered into a contract on, and dated the 81st of October, 1849, “ With Gouverneur Morris, George L. Schuyler, and Sidney G. Miller, to construct and complete a single-track railroad, with four miles of turnouts and branches, from the then terminus of these defendants’ road at Dover Plains, to the line of the Albany and West Stockbridge Railroad, near Chatham Four Corners, in the County of Columbia, including the cost of grading, masonry, bridging, superstructure, depot buildings, water stations and fencing, and every thing necessary for a complete and perfect road, except the cost of engineering and right of way; which contract or agreement prescribed the mode and manner in which said road was to be constructed, and stipulated that the whole of the road to Chatham Four Corners should be completed by the fourth day of July, 1852.
    “ In consideration whereof, these defendants agreed to issue to the said contractors, Morris, Miller and Schuyler, certificates, under the trust conveyance hereinafter mentioned, for the sum of two millions of dollars, as the entire consideration for the erection, building, completing, and finishing the said railroad, with the dépóts, turnouts, dépót buildings, fences and appurtenances, to be issued from time to time as the work progressed, upon the monthly estimates of the engineer of these defendants. The contractors agreeing, during the construction of the road, to provide for the interest warrants falling due in the mean time.
    “ And these defendants further say, that at the time of the execution of the said agreement, and pursuant thereto, these defendants made and executed a certain trust conveyance, bearing date the said thirty-first day of October, 1849,” being the said tripartite agreement, a copy of which is annexed to the answer. A copy of the material parts thereof is hereinafter set forth, and marked Schedule “ A.”
    They also say, that the contract and trust conveyance were delivered, and took effect at the same time, viz., on the 7th of September, 1850.
    That the certificates and interest warrants were issued in the form originally agreed on, and as hereinafter set forth, and marked Schedule “B.” That, after such contract and trust conveyance were executed, and before they were delivered, the defendants, to induce the contractors to deliver their contract, passed a resolution, dated tbe 23d of August, 1850, to receive from the contractors $250,000 of such certificates, with the same rights, as holders thereof, as such contractors had. That, to bring negotiations to a close, and induce the contractors, Morris, Miller and Schuyler, to commence work without delay, the company agreed to purchase such certificates, to the amount of $1,000,000, including the said $250,000, and issue capital stock, in exchange, and such agreement bears date the 7th of September, 1850. The substance of its provisions is in Schedule “ 0,” hereinafter set forth. That the contractors constructed the road, and certificates were issued, to the amount of the $2,000,000, and the defendants did purchase, to the amount of $1,000,000, as they had agreed to do, and now own them. Believing it for their interest to purchase still other certificates, the company passed a resolution, on the 24th of December, 1852, to purchase a further amount, equal to the unappropriated old stock of the company, payable, in the old stock, at par; and, under this resolution, they purchased large amounts, their whole purchases being $1,538,500, which they now own, and the whole amount owned by third persons being $466,500.
    That the extension was completed, and opened for travel on the 1st of April, 1852. Interest warrants, pursuant to the arrangement, were paid, in full, to the 1st of July, 1852; after which their payment depended on the net earnings of the extension, according to the terms of the trust conveyance. When the extension was completed, the company began to operate it, and have, since done so, according to their contract, and have kept the accounts, as they agreed to do. In making up the accounts, they have credited to the extension the receipts from all sources on the line thereof, and have charged to it the actual cost of running it, as agreed upon; and the expenses exceeding the receipts, they have applied the stipulated gross receipts from business on' the old road to the extent of three-quarters thereof. That the whole fund, so provided for payment of the interest, being insufficient, they have issued deferred warrants, from time to time, for the deficiency, bearing 7 per cent, interest, and payable from the first surplus of the fund, as provided by said trust conveyance.
    They also allege, “ That, pursuant to said trust conveyance, in the month of June, 1853, these defendants, under the direction of Robert Schuyler, their then president, made and rendered an account of said receipts and expenses, pursuant to the said trust conveyance, in the words and figures following, to wit:—

      To the Trustees of the Albany Extension:—
    Gentlemen,—The Directors of the New York and Harlem Railroad Company submit the first annual report of the operation of the Albany extension, in pursuance of the third section of the trust deed.
    The opening of the road from Dover Plains to Chatham Four Corners took place on 1st April, 1852, by an arrangement and settlement made between the contractors and the company; and, from that date, the accounts of the transportation department have been arranged in the manner indicated by the trust deed, and the results will now be laid before you. By the settlement with the contractors, to which reference is made above, the interest warrants-of the Albany extension certificates, payable in July, 1852, were paid in cash. After that date, the payment of the warrants depended upon the net receipts of the extension; these falling due on the 1st January of each year, from the earnings from 31st March to 30th September; and these due on the 1st July, from the earnings from 30th September to 31st of March, and the annual adjustment made to the last date.
    With these explanations, the following statements will probably be easily -understood.
    The total steam service of the Harlem Road, from 1st of April, 1852, to 31st March, 1853, has been 591,276 miles as follows:—
    Miles.
    On the old road, 1st of April to 30th Sept.
    1852, ....... 209,205
    On the old road, 30th of September, 1852,
    to 31st March, 1853, .... 258,355
    - 467,560
    On the extension, 1st of April to 30th September, 1852,..... 63,583
    30th September, 1852, to 31st of March,
    1853, ....... 60,133
    --123,716
    Total as above, . . . . ' . . . 591,276
    The current charges, for the above service, for the same period, amount to $485,331.03, showing an average cost of each mile, run by steam, to exceed 82 cents, by a small fraction, which has been disregarded in the calculation. The extension service having been, as stated above, 123,716 miles, the current charges will amount to 123,716 x 82=$101,447.12. The receipts upon the Albany extension, and to and from stations on the old road, from 1st April, 1852 to 31st March, 1853, after deducting one-quarter of the joint business, as provided in the trust deed, have amounted to $138,361.43, as follows:—Revenue from Albany extension for twelve months, say from 1st April, 1852, to 31st March, 1853, has been—■
    From old road and Albany Extension, viz.:— Passenger fares, .... $65,526.06 Commutation,..... 522.50
    $66,048.56
    Less ¿ off old road proportion, . . 16,512.14
    $49,536.42
    From Albany Extension proper, . . 10,572.01
    -$60,108.43
    From old road and Albany Extension,
    viz., freight,.....$93,878.70
    Less ¿ off old road proportion, „ . 23,469.68
    $70,409.02
    From Albany Extension proper, . . 7,843.98
    -‘ 78,253.00
    Total revenue of Albany extension for twelve months,
    ending 31st March, 1853,.....$138,361.43
    From these earnings, say $138,361.43, have been deducted the current charges as above stated, ., . 101,447.12
    Leaving for interest warrants, . . . $36,914.31
    The interest warrants which fall due on 1st January, 1853, were deferred under the provision for that purpose in the trust deed, as the current charges absorbed the entire receipts; but towards the warrants due on 1st July, 1853, the above balance of $36,914.31 in cash, is now on hand.
    The warrants due 1st July, 1853, amount to . . $70,000.00
    Or, 2000 warrants of $35 each, upon each of which will be deferred $16.55, amounting to . . . 33,100.00
    And $18.45 on each paid in cash* . . . $36,900.00
    Absorbing the excess of the receipts over the current charges. By order of the Board, Robert Schuyler, President. Office of the New York and Harlem Railroad «
    Company, June 30, 1853.”

      “ And these defendants further answering, say, that pursuant to said statement, $36,900 was paid, in cash, upon the interest warrants due 1st July, 1853, and deferred warrants were issued to the amount of $33,000, in addition to the deferred warrants for $70,000, for the interest warrants due 1st January, 1853, making $103,100.
    “ That Robert Schuyler, the then president of these defendants, was a brother of George L. Schuyler, one of said contractors, and was also his partner in the firm of R. & G. L. Schuyler, and said statement was acquiesced in by the said contractors, as being made pursuant to the terms of said trust conveyance;
    “ That, in like manner, and upon the same principles, accounts were stated for the receipts of the fund for the six months ending September 30,1853, (the termination of the fiscal year,) amounting to . . ......$89,240.09
    And the charges thereon to..... 60,688.88
    Leaving applicable to coupons due January, 1854, . $28,554.21
    “But the board of directors of these defendants directed $35,000, or one-half of the amount of coupons, to be paid in cash, and deferred warrants to be issued for the remaining half, or $35,000; the cash payment exceeding the amount standing to the credit of the fund on the book of these defendants by the sum of $6,445.79.
    “ And these defendants further say, that from September 30, 1853, to September 30, 1854, the whole revenue accruing to the fund, from the several sources aforesaid, amounted to $201,624.84 And the charges thereon to..... 171,392.43
    Leaving applicable to interest due up to the 1st of-January, 1855, . . . . . . $30,232.41
    “But the board of directors of these defendants directed the payment of $35,000 at each of the half-yearly periods, and an issue of deferred warrants for the other half; being an excess of cash payment, over the. amount actually realized, to the extent of $39,767.59.
    And these defendants further say: That the condition of the fund to the first of January, 1855, was as follows, viz.:—

      Deferred warrants issued January 1, 1853, . . $70,000.00 do. July 1, 1853, . 33,000.00 do. January 1, 1854, . . 35,000.00 do. July 1, 1854, . 35,000.00 do. January 1, 1855, . . 35,000.00 Total warrants to 1st January, 1855, . . $208,100.00
    Amount of cash paid over receipts, $46,213.38 Less overplus, September, 1853, . 1,431.00
    - 46,199.07
    Total deficiency,.....$254,299.07
    “And these defendants further answering, say: That, in the like manner, and upon the same principles, accounts were stated by these defendants, of the income and expenditures of the Albany extension, during the year ending on the 30th of September, 1855, showing the following results, viz:—
    Total revenue,.......$229,358.67
    Expenditures,....... 168,794.67
    Leaving applicable to interest, .... $60,564.00 Out of which was paid upon the interest warrants falling due July 1, 1855, .... 35,000.00
    Leaving applicable to those due January 1st, 1856, $25,564.00
    The total amount of the year’s interest being . $140,000.00 And the amount applicable to its payment, . . 60,564.00
    Deferred warrants were issuable for . . $79,436.00
    Of which amount, there were authorized to be issued July 1, 1855, . . ■ . . . . 35,000.00
    Leaving to be issued January 1, 1856, . . $44,436.00
    “ And these defendants further answering, say: That this addition of $79,436 of deferred warrants, to the sum of $256,299.07, the previous deficiency, malees the total deficiency to the 1st of January, 1856, of $333,735.07.
    “ That, with these statements, they caused full and accurate accounts to be prepared and exhibited to said plaintiffs, pursuant to said trust conveyance, showing all the items of receipts and ex-penditares of said Albany Extension fund; and also of the current expenditures of the whole road, for operating and maintaining the same, in the manner hereinbefore stated, showing the average expense of each mile run by passenger and freight trains, and the number of miles run by steam power upon said extension, as well-as upon the old road to Dover Plains, as required by said trust conveyance, to which statements these defendants pray leave to refer; copies whereof are hereto annexed, marked No. 1, No. 2, No. 3.”
    In their answer they further say, “ That said statements and accounts are in all respects correct,” that they have fairly applied all receipts from the business of the extension, and the three-quarters of the stipulated gross receipts from the said business of the old road, and have charged, only just expenses, to the extension fund. They admit that the contractors have sold to third persons for value, all, or nearly all of said certificates, but deny that such third persons construe the trust conveyance as the plaintiffs do, and allege that only one of them has brought a suit, and say, that no others have come in as plaintiffs. It admits the plaintiffs have no legal interest in the event of this suit, and avers that the defendants own, by purchase over three-fourths of the certificates, and prays that “ the said complaint be dismissed with costs.”
    (No. 1,)

      Summary of Albany Extension Revenue for the Year ending September 30, 1855.
    Receipts from local traffic:—
    Amount of passenger fares . $11,460 35
    “ “ freight receipts , 13,596 78
    -- $25,057 13
    Receipts from Albany Extension and old road joint service:—
    Three-fourths of gross receipts from fares .... . "$72,587 17
    Three-fourths of gross receipts from freight...... 125,720 96

      Three-fourths of gross receipts from mails ....
    Three-fourths of gross receipts from expresses . . . .
    Total from Albany extension and old road joint service
    4194 75 1798 57
    $204,301 45
    Total revenue for the year . . $229,358 58
    (No. 2.)

      Summary of Albany Extension Charges for the Year ending September 30, 1855.
    Total number of miles run by passenger and freight trains, by steam power, upon the whole road, 567,091, viz.:—
    Upon the old road . . . . 418,905
    “ “ Albany Extension . . 148,186
    - 568,091
    Total expenditure for operating and main-' taining the whole road, (not including new or additional engines, cars, etc., except to keep the valuation thereof equal to the
    original cost,)..... $756,816 09
    Less the amount chargeable'to City and New Haven lines ..... 110,858 04
    Net amount chargeable pro rata to old road and Albany extension . . . $645,958 05
    Chargeable to old road at $1.13-nj-per mile, or as 567,091: $645,-958.05 :: 418,905 to . . $477,163 38 Chargeable to Albany Extension at $1.13-^- per mile, or as 567,-091: $645,958.05;: 148,186-to 168,794 67
    - $645,958 05

      (No. 3.)

      Statement of the Albany Extension interest Fund after Provision for Coupons becoming due January 1, 1856.
    Amount of revenue as per statement No. 1 . ... $229,358 67
    Amount of charges as per statement No. 2 . • .
    Leaving applicable to interest, Amount of coupons due July 1, 1855. ....
    Amount of coupons payable January, 1856
    Deficiency for the year Deficiency September 30, 1854
    Total deficiency of the fund Amount of deferred warrants authorized up to and including January 1, 1855 Amount of deferred warrants authorized for July 1, 1855 . Amount of deferred warrants to meet deficiency, January 1,
    ' 1856 ....
    Amount of cash advanced and authorized to be advanced beyond the amount received, up to and including present year.....
    168 794 67
    --$60,564 00
    70.000 00
    70.000 00
    - 140,000 00
    79,436 00 254,299 07
    . $333,735 07
    208,100 00
    35.000 00
    44,440 00 46,195 07
    ■- $333,735 07
    . No witness was examined by either party on the trial of this action. The papers, the substance whereof is hereinafter set forth, as schedules A B and C, were read in evidence, and it was admitted they were delivered and exchanged at the same time. Schedules A B and C are as follows, viz.:—■

      (A.)
    “ The New York and Harlem, Railroad Company, to Shepherd Knapp, Alexander H. Holley, and Morris Ketehum.

    TRUST CONVEYANCE.
    “ This Indenture, made this thirty-first day of October, one thousand eight hundred and forty-nine, between the New York and Harlem Railroad Company, of the first part; Shepherd Knapp, of the City of New York, Alexander H. Holley, of Lake-ville, Connecticut, and Morris Ketehum, of the City of New York, of the second part; and Gouverneur Morris, of Morrisania, and George L. Schuyler and Sidney G. Miller, of the City of New York, of the third part.”
    It then recites the making of an agreement, of the same date, between the parties of the first and third parts, by which the latter agree to construct and complete the extension for $2,000,000, for which, as they may be entitled thereto, the parties of the first part are to “ issue certificates, in sums of $500 and $1000, chargeable upon the fund hereinafter provided, with interest for the same in the manner, "and from the fund herein provided,” on presentation of the interest warrants.
    That to secure the payment of said $2,000,000, and the interest to grow due, the parties of the first part have agreed to convey, to those of the second part, as trustees, the road so to be constructed.
    By it, the parties of the first part then convey, to those of the second, and the survivors of them, the track of the extension, the dépóts, dépót-buildings, engine houses, and other improvements and constructions then on it, or to be put on it, with all income, emoluments, rights, franchises, rents, issues and profits, etc., etc., with the appurtenances. To have and to hold the same, etc., as joint tenants, subject to the conditions, etc., thereinafter contained; and it then provides, that if the parties of the first part shall pay, to the holders of the certificates, $2,000,000, and interest according to the certificates, “at the times, and in the manner, and out of the proceeds and earnings of said road, as hereinafter provided;” then the said agreement shall be void, and the estate granted by it shall cease, and be void. It then proceeds, in the words following, viz.:—

      “ And it is hereby mutually covenanted and agreed, by and between the said parties to these presents, and this present Indenture, and the said certificates, are hereby declared to be made, contracted, and issued, upon the terms and conditions following, that is to say:
    The said parties of the first part covenant and agree, to and with the said parties of the second part, that when, and as soon as the said parties of the third part shall build, complete, and finish the said railroad, between said points hereinbefore mentioned,, or any part thereof which can be advantageously used for the transportation of freight and passengers, that they, the said parties of the first part, will forthwith extend the travel of their cars and engines over the same, and use their best endeavors to render the same productive and profitable.
    “ Second.—The said parties of the first part covenant and agree, to furnish the motive power, cars, and machinery, necessary to operate and maintain the said part of said road, and to conduct, manage, and arrange the system of business upon said road so as to exhibit clearly and distinctly, from time to time, to the parties of the second part, the earnings and receipts of that part of said railroad hereinbefore described, and also the receipts of the present road, from the business, from and to stations on that part of the road herein described, to and from stations on the present road, in order that the whole income, of and from the road herein described, may be ascertained.
    “ Third.—The said parties of the first part further covenant and agree, to keep the accounts of the current expenses of the whole road, for operating and maintaining the same, distinct and separate from capital accounts, so that the treasurer may annually exhibit to the parties of the second part the total expenditures for operating and maintaining the whole road, (not including new or additional engines, cars, etc., except to keep the valuation thereof equal to the original cost,} so as to average the same upon each mile run by passenger and freight trains, by steam power, upon the whole road, and thereby ascertain the amount chargeable against the income of that part of the road hereinbefore described.
    “Fourth.—The said parties of the first part further covenant and agree, to credit to that part of the road hereinbefore described, the whole receipts from all sources on the line thereof; and to charge thereto the actual cost of the number of miles run thereon, by freight and passenger cars, at the average cost per mile on the whole road, to be ascertained as hereinbefore provided, and to appropriate the residue to, or towards, the payment of the interest warrants on the said certificates, as the same shall become due and payable.
    “Fifth.—The said parties of the first part further covenant and agree, that in case it should so happen, that the net earnings of that part of the road, herein before described as above stated, should be inadequate to the payment of the interest warrants upon the said certificates, that they will apply the gross receipts, from the business over the present road, from and to stations thereon, to and from stations on that part of the road herein described, so far as the same may be necessary for the payment of interest, to an amount not exceeding three-quarters of the whole of such gross receipts.

      “ Sixth.—The said parties of the first part further covenant and agree, that in case the whole fund, as above provided, for the payment of interest, shall be inadequate to the payment thereof, that they will issue to the holders of interest warrants, respectively, new warrants for so much as shall remain unpaid, bearing interest at seven per cent, per annum, to be paid, in whole or in part, from the first surplus of the fund to be provided as aforesaid, after paying and discharging the interest warrants falling due, and those in arrear, until all such arrears shall be paid off and satisfied.
    “ Seventh.—It is further understood and agreed, by and between the parties to these presents, that each year’s receipts and payments, when interest is paid in full on such certificates, shall be closed, and no subsequent deficiency of the fund for the payment of interest shall be charged upon the surplus of any previous year.
    “ Eighth.—That the said parties of the first part further covenant and agree, that in case at any time the interest shall be in arrear upon said certificates for two whole years, that a meeting may be called, by the parties of the second part, of the holders of said certificates, at which the holder of every five hundred dollars, of said certificates, shall be entitled to one vote; and in case a majority, in amount, of such holders shall, by resolution, so direct, the said parties of the second part shall enter upon and take possession of all and singular the premises hereby granted and conveyed; and shall grant, bargain, sell, and dispose of the same, giving due notice, according to law, of the time and place of such sale, in two of the public newspapers in each county through which the said road passes, and serving like notice, with a copy of the minutes and resolutions of such meeting, upon the said parties of the first part. And the parties of the first part covenant and agree, to surrender possession of the said premises to the purchaser or purchasers, at any such sale, unless the said purchasers shall elect to continue the foregoing arrangement to work the road, as provided in the next section.
    “ Ninth.—The said parties of the first part, further covenant and agree, that the purchaser or purchasers, at any such sale, shall be entitled, if he or they signify his or their election to do so within sixty days after such sale, to all the benefits and advantages of the foregoing covenants and agreements for the operating and maintaining the said road hereinbefore described, and for the payment of the income thence arising to such purchaser or purchasers, to be ascertained and adjusted as hereinbefore provided.
    “ Tenth.—It is hereby expressly understood and agreed, that said certificates shall be issued by the said parties of the first part to the said parties of the third part, or their assigns, and shall be transferable by either of the said parties of the third part; and each of the said parties of the third part is hereby expressly authorized and empowered, by the others, to make such transfer, by executing an assignment of such certificates, or any of them, in his own name, on behalf of himself and the others of the said parties of the third part, endorsed upon such certificates.
    “ Eleventh.—And it is further mutually understood and agreed by and between all the parties 'to these presents, that in case of non-payment of the principal of said certificates on the first day of July, in the year of our Lord one thousand eight hundred and seventy-two, the holders of the said certificates, or a majority of them, at such meeting, to be called as hereinbefore provided, in the eighth article of this indenture, shall be authorized, by resolution, to direct the said parties of the second part to enter upon and take possession of the said hereinbefore granted and described premises, and to grant, bargain, sell, and dispose of the same, giving due notice of the time and place of such sale, according to lawor the said holders, at their option may, by a like majority, agree to extend the same arrangement for operating and maintaining the said portion of the road hereinbefore described, for the further term of twenty years, upon the same conditions and provisions for the application of the net receipts thence arising; and the said parties of the first part shall, in that event, be subject to the same liabilities and covenants, and entitled to all the privileges and advantages hereinbefore specified, limited and contained. And in case of a sale of said premises, as hereinbefore mentioned, the said parties of the first part shall give possession to the purchaser or purchasers, at any such sale, unless such purchaser or purchasers shall elect within sixty days, as provided in the ninth article of this agreement, to avail himself of the covenants and agreements herein contained, for the working of said road, by the parties of the first part; in the event of which election, all the covenants and agreements hereinbefore contained, in relation to the operating and management of said road, shall be continued for the benefit of the purchaser, and the parties of the first part, as hereinbefore contained.
    “ Twelfth.—And it is hereby further declared and agreed, by and between all the parties to these presents, that in case the said parties of the third part fail to perform their agreement, or abandon their contract, after partially executing the same, and after the issue and transfer of any part of the certificates hereinbefore mentioned, the said parties of the first part may declare said contract to be forfeited, and shall notify the parties of the second part thereof; and thereupon the said parties of the second part shall forthwith call a meeting of the holders of such certificates, as hereinbefore provided; and the holders of said certificates or the majority of them, shall have the right to assume said contract, either by themselves or by such of them as may be designated and appointed by said meeting; who shall thereupon enter into suitable and proper agreements with the said parties of the first part, to be approved by the parties of the second part, to continue and complete the said road, according to the said contract and specifications, upon the terms and conditions therein expressed, and for the consideration of the residue of the certificates then unissued.
    “ In witness whereof, the said parties to these presents of the first part have caused their corporate seal to be hereunto affixed; and the said parties of the second and third parts have hereunto set their hands and seals, the day and year first above written.” (It was signed and sealed by each of said parties.)
    The certificates to be issued to the contractors, and secured by the Trust Conveyance above set forth, are as follows:—
    (B.)

      Albany Extension of the New. York and Harlem Railroad.

    Mo. $1000
    This certifies, that G-ouverneur Morris, Sidney G. Miller and George L. Schuyler, for the construction of the Albany Extension, are entitled to an undivided interest of one thousand dollars, in the sum of two millions of dollars, secured by a certain deed of trust, (hereby declared to be part and parcel of this certificate, as if recited herein,) made by the Mew York and Harlem Railroad Company, of the first part, Shepherd Knapp, Alexander H. Holley and Morris Ketchum, of the second part, and the said Morris, Miller and Schuyler, of the third part, dated the thirty-first day of October, 1849. Also, that the said sum of one thousand dollars is payable to them or their assigns on the first day of July, 1872, in the manner, and from the fund, in said indenture declared, together with interest thereon at the rate of seven per centum per annum, on the first day of every January and July ensuing the date hereof, upon presentation of the interest warrants hereto annexed, as the same severally become due, at the office of the Mew York and Harlem Railroad Company in the City of Mew York, according to the provisions of the aforesaid trust deed.
    In witness whereof, the Mew York and Harlem Railroad Company, by resolution of the Board of Directors, passed on the 10th day of September, 1850, have [l. s.] caused these presents to be sealed with their corporate seal, and signed by their President; and the said Trustees have also hereunto set their hands this first day of October, 1850. Robert Schuyler, President. Countersigned, Shepherd Knapp, 1
    A. H. Holley, l Trustees.

    Morris Ketchum, J

      ['Form, of forty Interest Warrants annexed.]

    The New York and Harlem Railroad Company will pay the , bearer hereof thirty-five dollars on the first day of July, 185 , for interest to that date on certificate of said Company No. for one thousand dollars, dated 1st October, 1850, from the fund specified in the deed of trust dated 31st October, 1849, and referred to in said certificate.
    --, Treasurer.

    (0.)

      “ This agreement, made the seventh day of September, 1850, between the New York and Harlem Railroad Company, of the first part, and Gouverneur Morris, Sidney G. Miller and George L. Schuyler, of the second part.”
    It recites, the making of the contract for constructing and completing the extension, the making of the tripartite agreement, and by it, the parties to it agree, first, that, when the extension is completed and accepted, the company will purchase any and all certificates issued under the tripartite agreement, which may be tendered to them, and give in exchange ten shares of capital stock for each certificate of $500, and twenty for each one of $1000, until such purchases shall reach $1,000,000, or 20,000 shares of said capital stock.
    Second.—The purchases shall be made in the order the certificates are presented, and the privilege of so exchanging is to continue five years, unless the $1,000,000 is sooner taken up.
    Third.—The certificates are to be accompanied with the interest warrants from the last preceding payment of interest, and the stock so exchanged is to be entitled to future dividends, but not to any privilege over stock previously issued.
    Fourth.—The certificates, to the amount of $250,000, to be assigned, under the resolution of the 23d of August, 1850, are to stand on the same footing as any other, as to the provisions of this agreement, but are not to increase the whole purchase under it, above $1;000,000.
    Fifth.—The parties of the second part may exclude any certificates, except those mentioned in the fourth article, from the benefits of this agreement, by an endorsement to be made on them to that effect.
    Sixth.—Such purchase of the certificates is not to be a payment of them; on the contrary, the company, as holders of them, are to have the same rights, in every respect, as the parties of the second part would have, if continuing actual owners.
    Seventh.—The contract for building the extension is so modified, that it is to be commenced forthwith, and twenty-two miles, from Dover Plains, finished by the 4th of July, 1851, and the residue by the 4th of July, 1852. It was signed and sealed by each of the parties to it.
    The printed case, on which this appeal was heard, contained the pleadings, and the papers and agreements hereinbefore set forth, at length; the judgment rendered, (which it is unnecessary to insert,) the opinion accompanying the decision at Special Term, the notice of appeal, and the following “ case and exceptions, viz.:—
    “ SUPERIOR COURT.
    “ Shepherd Knapp, Morris Ketehum, and Alexander H Holley, against The New Yorlc and Harlem Railroad Company.

      Case and Exceptions.

    “ This cause was brought to hearing before the Honorable Joseph S. Bosworth, on the 24th of April, 1856, at a Special Term of this Court, held at the City Hall of the City of Hew York.
    Ho witness was examined by either party. The trust conveyance of the date of October 31st, 1849, with the certificate annexed thereto, and the agreement of the 7th of September, 1850, copies whereof are annexed to defendants’ answer, as Schedules A, B and C, were admitted and read in evidence. It was also admitted, that they were delivered and exchanged at the same time.
    The accounts, reports and statements, set forth in the complaint and answer, were also admitted and read in evidence.
    It was also admitted, that they were made out at or about the time they severally purport to have been made, and were accessible and open at all times, to be inspected by any party interested therein; and that the defendants settled, from time to time, with the certificate-holders, on the basis and terms thereon stated; but it was not admitted, that the paper, contained in the answer of the date of June 30th, 1853, purporting to be a letter or report to the trustees, had been served on them personally.
    It was also admitted, that the said statements of the receipts from the Albany Extension, and of the expenses of running it, as so made up and read in evidence, were substantially correct, assuming the basis on which they were made to be the true one.
    It was also admitted, that the defendants had become the purchasers and owners to a large amount of such certificates, in the manner, and under the circumstances stated in the defendants’ answer.
    It was stated by counsel of both parties, that the questions to be decided, were deemed to be questions of law, and were, in substance:—
    1. What is the proper construction of the agreement of the date of the 31st of October, 1849 ?
    2. Are the plaintiffs, and those they represent, estopped from insisting upon any construction different from that on which the accounts had been made up, and on the basis of which the claims for interest have been settled with the holders of the certificates ?
    3. Are the defendants liable, as principal debtors, for the payment of the principal or interest of the certificates ?
    4. Have the defendants, as holders and owners of a part of the certificates, which they had so purchased, the same rights in respect thereto, as the original holders ? or, are the certificates to be treated as extinguished from the time of the defendants’ purchase thereof?
    After hearing counsel for the respective parties, and deliberating thereon, the Court, on the facts admitted by the pleadings, and so admitted on the trial as aforesaid, did decide, as matter of law, as follows:—
    1. The accounts should be made up so as to credit to the extension all earnings from the business, beginning and ending in its termini, and also its just proportion of receipts from business, from and to stations on it, to and from stations on the old road.
    2. The gross receipts mentioned in the fifth article, to the extent of three-quarters thereof, if so much be necessary, are to be applied directly to pay the interest, which the net earnings of the extension may be inadequate to pay.
    3. The holders of the outstanding certificates are entitled, to have the account for each year stated, so as to show what portion of the gross receipts for each year, would be applicable to them; and their proportion of the surplus, of any one year, is to be ap-' plied to meet the deficiency of any previous year, until the interest on such certificates shall have been paid in full.
    4. There is no personal obligation on the part of the company to pay the principal of the certificates, or the interest; and the company has the same rights, in respect to the certificates transferred to it, in exchange for its stocks, as the original holders had to participate in the fund created to pay interest, and as security for the costs of construction.
    The defendants did, thereupon, except, then and there, to each of the three first of the said conclusions of law, separately, in due time and form.”
    On the 10th of July, 1856, a judgment was entered, on behalf of the plaintiffs against the defendants, in conformity with the foregoing decision, and it is from that judgment that the appeal, in this action, is taken.
    This appeal was heard in March, 1857, before Duer, Bosworth and Slosson, J. J.
    The suit of Cary v. The Harlem Railroad Company, and Knapp, et al, was commenced on the 25th of September, 1855, was tried before Hoffman, J., without a jury, in May, 1856, and it came before the General Term, on an appeal -by the plaintiff, from a part of the judgment, and on an appeal by the Harlem Railroad Company from the whole judgment entered therein. It is brought by the said Cary, as plaintiff, “ as well on his own behalf, as in behalf of all other persons,” holding any of these certificates, “who may come in and be made plaintiffs, according to the course and practice of this Court, and contribute to the expenses thereof,” against the Hew York and Harlem Railroad Company, and Shepherd Knapp, Alex. H. Holly and Morris Ketchum, as defendants.
    It is brought by Cary, as the holder and owner of such certificates, alleged to amount to about $14,000. He insists upon the same construction, of the tripartite agreement, as Knapp and others did, in the suit brought by them, and in his complaint “prays, that the said New York and Harlem Bailroad Company may come to a full account, in the premises, with the holders of said certificates, and said trustees, and may pay over to such trustees all sums of money which may then be found in their hands, applicable to said certificates, and that said trustees may pay to the plaintiff, and the holders of said certificates, such sums as they may be, severally, entitled to receive, and that said New York and Harlem Bailroad Company, may be compelled to keep books of account, according to the true intent and meaning of said trust deed, or that the said trustees, on any default of the New York and Harlem Bailroad Company appearing in the premises, be directed, by the order of this Court, to sell at public auction, all, and singular, the premises, rights and interest so conveyed to them, and constituting a fundfor the protection of the said certificates, and apply the same accordingly, or that the plaintiff may have such other and further relief as the case may require, with his costs.”
    The defendants, severally, answered the complaint. Their answers contain no material allegations, not found in their pleadings in the action first mentioned. On the trial, the same papers were put in evidence, which are marked, in the first entitled action, as Schedule A, B, 0, and Nos. 1, 2, 3. The defendants admitted that the plaintiff was a stockholder of the New York and Harlem Bailroad Company, and owned one or more of the said certificates.
    A report of the company, dated October 4th, 1850, was read in evidence, and proved to have been printed and distributed to the stockholders, declaring, among other things, that by the plan of the extension, it is treated as a separate property, as if it were to be constructed by a new company, under a different charter; and that, by such plan, the old road remained free from liability for expenses or interest on the debt; and that the old stock had a new source of probable profit opened to it, free from all danger to the present resources of dividend, with an option of placing the extension on the same footing as the old road, bv paving $2,000,000.
    The original of the aforesaid paper, dated June 30, 1853, and signed “ Robert Schuyler, President,” was proved to be in the handwriting of said president, and it was, also, proved, that he resigned his office in August, 1853.
    Correspondence between the plaintiff and the Harlem. Eailroad Company, commencing on the 22d of September, 1855, and some statements, of the income and expenses of the Albany Extension, made in consequence of such correspondence, were put in evidence, but they contain nothing affecting the decision of the main questions in controversy.
    The facts found by Judge Hoffman, and his conclusions of law thereon, are as follows:—
    “First.—The defendants, the Railroad Company, were empowered, by an Act passed March the 6th, 1849, for the purpose of completing their road to the Hudson River, opposite to the City of Albany, to increase their capital stock to an amount not exceeding $5,000,000, to be paid out of the earnings of the road, when the same shall be completed, and in the mean time, they might borrow, from time to time, for the purpose aforesaid, money, not exceeding in the whole, $2,000,000, at a rate not over 7 per cent., and might give to the holder of any bond, or evidence of debt, issued for any part of such loan, the privilege of converting the same into the stock, to be issued under the act; or, before the maturity of the loan, they might also secure the payment of the loan, by mortgage of any part of their real and personal estate.
    “Second.—The company did not carry out the act in the manner contemplated, by a direct borrowing of money, which went into its own hands, and was employed directly in building the road, but resorted to a special contract and arrangement.
    “ Third.—Such special contract and arrangement is fully set forth and specified in the trust conveyance, certificate, and agreement, to the answer of said defendants, the railroad company, annexed, marked schedules A, B and 0, and set forth in this case, which said conveyance and agreement were delivered, and took effect, on the 7th day of September, 1850, and not till then.
    “Fourth.—The contractors therein mentioned, viz., Morris, Miller and Schuyler, did, thereupon, enter upon said work, and completed the same, pursuant to agreement, on the 1st of April, 1852, on which day said road was delivered to said railroad company, and has been run and used by them ever since, as in said conveyance and agreement was required.

      “ Fifth.—Prior to, and on said 2d day of April, 1852, certificates were issued to said Morris, Miller and Schuyler, as therein required, to the amount of $2,000,000, with interest warrants annexed, which said certificates and warrants were in the form in said schedule required, and not otherwise, and the interest in said certificates was duly paid up to, and including the first day of July, 1852.

      “ Sixth.—The said defendant, the railroad company, pursuant to the said supplemental agreement, upon the completion of said extension of said railroad, did purchase $1,000,000 of said certificates, upon the terms and conditions therein mentioned, and thereupon became the holders thereof, and they have, from time to time, purchased, from the holders of said certificates, an additional amount thereof, and have paid for the same in the old stock of said defendants, at the par value thereof, or otherwise; and said defendants are now the holders of said certificates, to the amount of $1,533,500, the amount held by the plaintiff, and all other persons, being $466,500, and no more.
    “ Seventh.—The defendants made no payment of any of the interest warrants, due on the 1st of January, 1853, on the ground, that the current charges of operating said Albany Extension, so called, absorbed all the income, or fund, in said trust conveyance ‘ mentioned, during the period of six months then' preceding.

      “ Eighth.—At the end of every six months then ensuing, a statement of the said receipts and expenditures was made on the principle of the defendants, and, on the basis of such statements, payments were made on the interest warrants, and deferred warrants were issued. The following were said receipts and expenditures, and said payment of interest and deferred warrants, as made out and adjusted by the defendants, viz., for twelve months, ending July 1, 1853:—
    “ RECEIPTS.
    From old way and extension,
    From the extension,
    Total receipts,
    Expenditures, .... Leaving a surplus of .
    $119,945 44 18,415 99
    $138,361 43 101,447 12
    $36,914 31

      Interest warrants paid, .... $36,900 00 Deferred warrants issued, • . . 103,100 00
    -$140,000 00
    For six months ending January 1,1854, receipts were $89,240 09 Expenditures,....... 60,688 88
    Leaving a surplus of......$28,551 21
    Interest warrants paid, . . . $35,000 00
    Deferred warrants issued, . . . 35,000 00
    —-— $70,000 00
    For the year ending January 1, 1855, receipts were $201,624 84 Expenditures,....... 171,392 43
    Leaving a surplus of .
    Interest warrants paid, Deferred warrants issued,
    . $39,232 41
    . $70,000 00 . 70,000 00
    -$140,000 00
    For the year ending January 1, 1856, receipts were $229,358 67 Expenditures,....... 168,794 67
    Leaving a surplus of......$60,564 00
    Interest warrants paid, . . . $60,564 00
    Deferred warrants issued, . . . 79,436 00
    -$140,000 00

      " Ninth.—According to the statements of the defendants, the whole amount of interest warrants, which fell due during the said time, to wit: from July 1, 1851, to January 1, 1856, was $490,000. The whole amount of receipts, during said period, was $658,585.03. The whole amount of said expenditures, during the said period, was $502,323.10. The whole amount paid, during the said period, on said interest, was $202,464, and the whole, deferred warrants, issued was $287,536.
    “ Tenth.—Accounts of said receipts and expenditures were made out, during said period, every six months, to wit: on the 1st day of January and July in each year, and the certificate-holders received, respectively, their share of said payments of interest, and said deferred warrants, at, or about, the several times when the said interest became due.”
    “ CONCLUSIONS OF LAW.
    “ And my conclusions of law, upon such fects, are as follows:—
    “First.—That, according to the true construction, meaning and intent of the trust deed, bearing date the 31st of October, 1849, made by and between the Hew York and Harlem Railroad Company, of the first part, Shepherd Knapp, Morris Ketchum and Alexander H. Holley of the second part, Gouverneur Morris, Sidney G. Miller and George L. Schuyler, of the third part, the payment of the principal and interest of the certificates therein mentioned, and known as the Albany Extension Certificates, is entirely dependent upon the fund provided in the trust deed, and that there is no obligatory liability, on the part of said railroad company, to pay the principal or interest of said certificates, beyond the obligation to administer the fund properly, according to the provisions of said trust deed.
    “ Second.—That the accounts required to be kept by the said company, and exhibited to the said trustees, are to be made up so as to credit to that part of said road, called the Albany Extension, from Dover Plains to Chatham Four Corners, all earnings and receipts, beginning and ending within its termini, and, also, all such, and so much of the receipts from business, beginning upon it and ending upon the old road, or beginning upon the old road, and ending upon it, as is the proportion of the number of miles run upon the Albany Extension, in earning such receipts, to the whole number of miles run in so earning them, and to charge thereto the whole expenses of running and operating said extension.
    “ Third.—That, by the true construction of said trust deed, the gross receipts, mentioned in the fifth article thereof, are the receipts from business begun upon the old road, and ended upon the extension, or begun upon the extension and ended upon the old road, after deducting the proportionate share of the Albany extension as aforesaid, and that three-quarters thereof, if so much be necessary, are directly applicable to the payment of the interest warrants upon the Albany Extension Certificates, which the net earnings of the Albany Extension may be inadequate to pay.

      “ Fourth.—That it is competent and legal for said railroad company to purchase any of said certificates, and to hold the same, and the said railroad company have a right to retain such of said certificates as are now held by them as in full force and effect, and to receive the dividends of interest thereon, the same as any other holder thereof..
    “ Fifth.—fThat such of said certificates as are now so held and retained by said railroad company, are not merged and extinguished, in whole or in any part thereof, but the same are in full force and effect. Mtjbbay Hoffman.”
    The plaintiff excepted to the first, fourth and fifth heads, or propositions, of the said decision.
    The Hew York and Harlem Railroad Company excepted to the second and third of the said heads, or propositions, of such decision.
    A judgment was entered, conforming to the decision. The plaintiff appealed from so much of it as adjudged the points of the decision to which he had excepted. The Harlem Railroad Company appealed from the whole judgment.
    The appeals in this action were heard before Bosworth and Woodruff, J. J., in June, 1857.

      John Anthon and Wm. Henry Anthon, for plaintiff Cary, made and argued, in support of the appeal taken by him, the following points:—
    I. In taking the accounts, in addition to the application of the
    gross receipts, the certificates bought up by the company ought to have been treated as paid; and then it will result, that the entire fund created for the payment of the interest on the $2,000,000 certificates must be devoted exclusively to the payment of the interest on the certificates held by plaintiff, and is quite sufficient for that purpose. ' *
    II. The agreement between the company and the persons from whom they purchased the certificates, which they, by virtue thereof, claim to hold as liens on this same fund, not being sanctioned by the trustees proper, in whom the title was vested, cannot affect the rights or equities of the plaintiffs. The rule of non merger, as invoked in the opinion of the Judge, is incorrect, or does not apply. (Mead v. York, 2 Seld. 450-452; Truscott v. King, Id. 163; Van Scoter v. Lefferts, 11 Barb. 140.)

      III. If such, agreement is valid, and if the company has the right to hold such certificates hy virtue of such agreement, as liens on the fund, that agreement extends to one million of dollars only, and to the certificates for that amount, and no more. (Vide agreement between the company and the contractors, 7 Sept., 1850.)
    IV. The judgment ought to be amended by directing the entire exclusion, from the account, of all the certificates paid off in anywise by the New York and Harlem Railroad Company, or of all except one million, and affirming it in every other particular.

      John W. Edmonds and Charles W. JSandford, for the Harlem Railroad Company, made and argued the following points:—
    Two main questions are raised in the case:—
    . First, are the certificates which the railroad company hold extinguished by the transfer to them, or are they still valid and outstanding in their hands, to the same extent as the certificates held by others ?
    [This question was decided at Special Term, in favor of the claim of the railroad company.]
    Second, has the railroad company made a proper disposition of the funds provided for the payment of interest on the certificates ?
    [This question was decided at Special Term against the railroad company.]
    The defendants, the railroad company, have appealed on the second point, and the plaintiff has appealed on the first point. The trustees have not appealed from any part of the order.
    First Point.

      The extension certificates, held hy the railroad company, are as valid and outstanding, in their hands, as those held hy the plaintiff, or any other person.

    I. None of the certificates were issued until after the agreement of the 7th of September, 1850, between the railroad company and the contractors.
    H. By the sixth clause of that agreement, it was stipulated that the certificates which the railroad company might hold, should be valid and outstanding in their hands, and not be can-celled or discharged by their holding them.
    HI. The certificates were all issued, in the first instance, to the contractors, who were parties to that agreement; and this plaintiff, and all other holders, obtained their certificates from said contractors.
    IY. All the holders, therefore, took them, subject to all the equities existing between the original parties.
    V. Between the original parties, it was expressly agreed that they should be valid and existing in the hands of the railroad company, and they became equally so, as to all persons holding * under those original parties.
    VI. The doctrine of merger does not apply, for two reasons: 1. The railroad company were never the primary debtor for the amounts mentioned in the certificates, nor in any manner ever responsible to the holders for the payment of them. 2. But even if they had been, they had a right to prevent a merger, and did so prevent it, by their avowed intention so to do. (Mechanics’ Bank v. Edwards, 1 Barb. 271; S. C. 2 Ib. 545; Forbes v. Moffatt, 18 Ves. 384; 4 Kent Com. (3d Ed.) 102; Gardner v. Astor, 3 J. C. R. 53; Starr v. Ellis, 6 Ib. 393; Clift v. White, 2 Kern. 532 ; Hill v. Bebee 3 Ib. 566; Butler v. Miller, 1 Comst. 496.)
    Second Point.

      The receipts, mentioned in the fourth and fifth clauses of the Trust Conveyance, constitute a fund applicable, first, to the payment of expenses, and then to the payment of interest on the certificates.

    I. Three-quarters, in amount, of the holders of the certificates do now claim that, as the true construction of the instrument.
    II. All the certificate-holders, the original contractors to whom the certificates were issued, and the trustees, have acquiesced in the same construction. And, upon the faith of that" acquiescence, the railroad company has made payments and advances it was not bound to make. (Sherman v. Sherman, 2 Vern. 276; Willis v. Jernegan, 2 Atk. 252 ; Ticket v. Short, 2 Ves. Sen. 239; Murray v. Toland, 3 J. C. R. 575 ; Freeland, v. Hiron, 7 Cranch, 147; 1 Green. Ev. § 27, § 207, § 208.)

      HI. By this acquiescence of the other parties, and the acts of the railroad company, the holders of the certificates are now estopped from questioning our construction of the instrument.
    IY. But the true construction is, that contended for by the railroad company. It was never intended to impose the risk of the “ Albany Extension,” its construction or its subsequent ability - to pay its own expenses, upon the railroad company, but solely upon the contractors, and those to whom they transferred their certificates.

      Hiram Ketchum and Hiram Ketchum, Jr., for Knapp, et al.

    On the 12th of December, 1857, judgment was pronounced in both actions, by Slosson, J., in Knapp, et al. v. The Harlem Railroad Company, and by Woodruff, J., in Cary v. The Harlem Railroad Company, and Knapp, et al.

    The following opinions were delivered:—
   Slosson, J.

The questions involved in this case principally arise, upon the construction to be given to the trust deed of October the 31st, 1849. If its provisions are free from ambiguity, it will be unnecessary to look beyond it.

The general purpose of the deed is, to provide a fund for the payment of the annual interest, upon the sum, for the consideration of which the contractors had undertaken to construct the extension of the road from Dover Plains to Chatham Four Corners, and to mortgage the extension itself, with its dépóts, buildings, engine-houses, and other improvements and constructions, for the eventual payment of the principal, in July, 1872.

The deed contains no covenant, on the part of the Company, to pay the principal, nor for the payment of the interest, except by a proper application of the fund provided for that purpose.

There is, therefore, no personal obligation on their part, in respect to the payment of the principal; and the only recourse of the certificate-holders, in case of default on the part of the company to pay the principal, when due, is by a foreclosure of the road itself, in the manner prescribed by the deed.

The fund appropriated to the payment of the interest, consists, first, of the “ net earnings” of the business, to be done .on the line of the extension itself; and, second, if that be insufficient, of three-quarters of the “ gross receipts” arising from the business over the old road, from and to stations thereon, to and from stations on the extension, as hereinafter more fully explained.

By the term net earnings,” is intended the surplus of the “ receipts from all sources,” as expressed in the fifth article, on the line of the extension, after charging, against such receipts, the actual cost of running or operating the extension, to be ascertained in the manner specially provided for in the deed.

By the expression, “ receipts from all sources on the line” of the extension, we understand the receipts to arise from business to be done exclusively within the termini of the extension itself, and also that proportion of the receipts of the business of transportation from and to stations on the old road, to and from stations on the new, which, by apportionment thereof between the two, according to the number of miles run upon each in such business, would properly be credited to the new road.

Against these receipts, only, are the expenses of operating the extension to be charged, and it is the surplus of such receipts which constitutes the primary fund for the payment of interest.

What such receipts have been heretofore, cannot be determined without a restatement of the accounts by the company.

By the “gross receipts” referred to, in the fifth article,, was intended that proportion of the receipts of the business of transportation, from and to stations on the old road, to and from stations on the new, which, by the apportionment aforesaid, would properly be credited to the old road, and this without any deduction whatever for expenses, and it is to three-fourths of these receipts that the holders of the interest certificates or warrants are, by the terms of the contract, entitled to resort, in case of a deficiency, in the net earnings of the extension, to pay the interest in full.

There is no provision, in express terms, in the contract, for the contingency which has arisen, or is supposed to have arisen, to wit; that of an excess in the expenses of operating the extension, over its “ receipts from all sources," whereby no surplus or net earnings, in fact, exist, which can be applied to the payment of the interest warrants, and this gives rise to the question, which is the principal point of controversy, to wit: whether this excess of expenditure is to be first defrayed out of the gross receipts referred to, before any application of the latter to the payment of interest, which is the principle hitherto adopted by the company; or whether the gross receipts are to be applied at once, so far as may be necessary to the payment of the interest, leaving the balance of the expenditures of the extension to be provided for out of other funds of the company. This is the principle contended for by the plaintiffs.

The defendants contend, that the parties to the contract contemplated that the business of the extension proper, and that which it should contribute to the old road, would be always adequate to defray the expenses of operating the extension, and leave some surplus, in any event, for the payment of interest, and that the trust deed was framed on this theory, and common expectation, and that hence it provides only for net earnings of the extension, as the primary fund for the payment of interest, and gives a resort to the gross proceeds referred to, only, in case of a deficiency in such net earnings; that these two sources constitute, in truth, but one common fund for the payment of interest, though to be resorted to in succession, and that, by necessary implication, neither are applicable to interest, until the expenses of the extension are paid, and that hence, in the contingency which has happened—that of a deficiency in the receipts of the business of the extension, as above defined, to meet such expenses—it is to be made good out of the gross proceeds referred to, before the payment thereout of any portion of the interest.

The plaintiffs, on the other hand, contend, that the language of the contract is unambiguous, and that there is no escaping from the express provisions of the fifth section, by which the gross receipts referred to'are, in terms, appropriated to the payment of any deficiency,” in the interest, arising from the insufficiency of the net earnings of extension fully to defray it; and they urge, that, independently of the explicit terms of the contract, there are controlling reasons, some of which will be adverted to hereafter, why the parties must be held to have intended this; and they contend, that in the entire absence of “ net earnings,” the certificate-holders are in the same position, in respect to their right to resort to the gross receipts, that they would have been in, had there been merely a deficiency in net earnings, as expressed in the contract, i

Undoubtedly both parties contemplated net earnings” of the extension, to some extent. ¡Neither of them anticipated an unprofitable or failing business. ¡Neither of them could have contemplated that the business which would be done upon the extension would be inadequate to meet its own expenses, and probably both supposed, that the profits of the business over all its expenses would be adequate, in the general, to pay the entire annual interest of the cost of the extension, and so no express provision was made for a deficiency in receipts to pay expenses.

We think that the trust deed will fairly admit of but one construction. The receipts against which the expenses are to be charged are those only which are specified in the fourth article of the deed, and they are the receipts of the extension “ from all sources” as above explained.

There exists no provision, in the deed, charging these expenses against any other fund. If that proves inadequate to meet the expenses, all that can be said is, that it is a contingency not provided against in the deed.

It is no answer, to say that the parties never contemplated such an event; doubtless they never did, but that does not help the defendants. It was a contingency which might happen, and might have been guarded against. Had the parties, as the defendants now contend, intended to provide for the payment of the expenses of operating the extension, before any application of receipts to interest, they would naturally have so expressed themselves. The Court can only look to the language of the contract; and we must, if it be unambiguous, be confined to it, in determining what the parties intended. We find, in it, an express provision for charging the expenses in question against a certain fond, and no provision for charging them against any other, and we find an equally express provision for the payment 'of interest, out of any surplus of that fund, and out of a certain other fund, without deduction for expenses, if the first fund should prove inadequate.

The first provision was intended for the indemnity of the company, in respect to expenses; the second, for the security of the certificate-holders, in respect to their interest. The Court must look to the rights of both parties. It is entirely clear, that however confident the parties may have been, that net earnings would be realized from the business of the extension, the contractors for the work were not willing to rely upon that, as the only fund to which to look for their interest; the hazards of the future were, to some extent, taken into consideration.

The extent of net earnings, or the existence»of net earnings at all, would depend upon the amount of the expenses of the extension. It could not certainly be known, what these expenses would amount to; it was still more uncertain, what would be the increase of business arising from the extension of the road.

In this uncertainty, as security for the payment of the interest was one of the primary objects of the deed, the provision for the application of the gross proceeds in question, to cover the case of a deficiency in the net earnings of the extension, was the most natural one that could be adopted. It furnished a security which was reasonably reliable. These interest warrants were to be made negotiable, and, to give them negotiable value, it was necessary that the provision for their payment should be such as could be safely depended on; and this was especially important, in view of the fact, that the company was not personally responsible for the payment.

Now, all these objects are secured, by the provision in respect to the gross receipts, if the expression, “gross receipts,” is to be understood in its ordinary popular signification, to wit: receipts without deductions for charges or expenses; but if these receipts are, equally with the receipts from the business of the extension, to be charged with the expenses of operating the extension, the whole security for interest is again rendered uncertain and doubtful, since it cannot certainly be said, in respect to the business of any one year, that the expenses, of operating the extension, may not absorb the entire receipts, both of the extension, and of that part of the old road, embraced in this provision, in respect to the gross receipts.

We think the parties intended precisely what they have expressed in this instrument. By “ net earnings” and “ gross receipts,” they intended what those expressions in popular meaning signify, and nothing other or different; the whole spirit of the contract, the objects to be secured and the language of the deed, all import it, and render this construction necessary. Upon this construction, and on no other, can the distinction made between “ net earnings” from one source, and “ gross receipts” from the other, be explained, and why the contract did not, in terms, provide that the two should constitute a common fund, against which the expenses in question should be charged. It was not so done, '• because such was not the intention of the parties.

But it is said, that the parties have themselves, practically, given a different construction to these stipulations, and have, by their acts, adopted that now contended for by the company.

These acts consist, in the rendering, by the company, to the trustees, or submitting to their inspection, for a period of some three years, before the filing of the complaint in this case, annual accounts of the receipts and expenses of the extension, made upon the principle for which the defendants now contend, and the payment of interest, and the issuing of deferred warrants (or warrants for unpaid interest, as provided form the sixth article of the deed of trust) to the holders of the certificates, upon the principle adopted in said accounts; and it is now contended, on the part of the defendants, that the Court is bound to adopt the construction thus practically given, to the contract, by the parties themselves.

It is undoubtedly true, that, where the provisions of an instrument are ambiguous, the Court may look to the acts of the parties done under it, “ as a clue” to their intention. (Chapman v. Bluck, 4 Bing. N. C. 187; Doe ex den Pearson v. Ries, 8 Bing. R. 180.)

The principle itself is intelligible enough, but I think it admits of great doubt, whether it can be properly applied" to a case like the present—that of a contract strictly executory, covering a period of a long number of years, during each of which accounts are to be rendered of receipts and expenses, and payments to be made semi-annually, and, in respect to which, the only ambiguity which exists, if any, is as to the principle upon which the accounts shall be made up.

In respect to the holders of the certificates, moreover, it may be said, that though they have accepted deferred warrants for a portion of their interest, it by no means follows, that they understood that the accounts were made up on a principle different from that which was sanctioned by the deed of trust. There is no evidence, that they ever saw the accounts; and though it is admitted in the case, that “ the accounts, reports and statements set forth in the complaint and answer (which undoubtedly did show the principle adopted by the company) were accessible, and open at all times to be inspected by any party interested therein, and that the defendants settled, from time to time, with the certificate-holders, on the basis and terms therein stated,” it does not follow, that, in fact, these accounts were ever examined by them, or that they knew upon what exact principle they were made up.

The company, as is admitted in the case, undoubtedly settled with them, “ upon the basis and terms” stated in the accounts; but I do not understand that admission to refer to any thing more than the action of the company itself.

It is not a question of notice, but of practical conduct, by parties to a contract, with a view to determine its construction, and, to be of any force for such a purpose, such conduct must appear to have been intelligent, and with a full actual knowledge and understanding of all the circumstances. It is true, the complaint admits the rendering of accounts, from time to time, to the plaintiffs; but the plaintiffs are the trustees, and the certificate-holders, would have a right to assume, without themselves inspecting the accounts, that the trustees had seen to it, that the principle of the accounts was in accordance with the provisions of the trust deed. In fine, there is nothing in the case to show, that the certificate-holders, when they received their deferred warrants, knew that they were not issued in strict conformity with the provisions of the sixth article of the trust deed.

The fact, therefore, of their receiving payment, in money, for a part only of the interest, and deferred warrants for the residue, is not to be regarded by the Court as affecting the construction of the instrument in question, or as indicating an understanding, on the part of the contractors, in respect to its meaning and import, other than, or different from, that which the Court itself has assigned to it.

It is a sufficient answer, however, in our judgment, to this whole objection, to say, that the construction of this instrument is not of so doubtful a character, as to render a resort to this extraneous evidence necessary or proper, in order to explain it.

Then, are the plaintiffs, as respects the accounts already rendered, and the certificate-holders, as respects the interest already paid, and deferred warrants heretofore issued, concluded, by their supposed acquiescence in the principle adopted by the company?

It is difficult to say this, unless it can be clearly seen, that the company would be in some way injured, by requiring a resettlement of the past accounts, upon the true principle.

They certainly have not paid more, in any one instance, than they were bound to pay upon the construction of the contract adopted by the Court. They have, in two instances, it is true, paid more, in money, to the certificate-holders, than, upon their own construction of the instrument, they were under obligation to do; but that was not a payment to their own injury, since it was, in fact, less than they were, at the time, bound to pay.' They have not pretended, that by reason, or in consequence, and on the faith of the alleged acquiescence, they have conducted their affairs in any other or different way than they otherwise would have done, or have made payments, or incurred obligations which, but for it, they would not have done.

"We think, therefore, that neither the trustees, nor the certificate-holders, are to be held to have acquiesced in the principle upon which the past interest accounts have been settled, so as to preclude them from now insisting upon their being re-adjusted, and settled in conformity with the true meaning of the contract.

We are all of opinion, that the company have, in respect to the certificates purchased by them, acquired the rights, and stand in the shoes of the original holders. There was no merger. There is no personal liability for the debt, either principal or interest, on the part of the company, and, consequently, no confusion of rights, as debtor and creditor, in the same person, arising from the purchase. And even if there would otherwise be a merger, yet equity will preserve the rights distinct, where the intention, on the part of the person possessing the rights, to preserve such distinction, is either expressly shown, or is to be implied from the benefit to result from so preserving it. (2 Yesey, Rep. 264.)

The agreement of the 7th day of September, 1850, is, unequivocal on this subject, in respect to one million in amount of these certificates, and, in respect to the residue of the certificates so purchased, the purchase was made under resolutions of the board of directors, one of which, in terms, and the other by fair intent indicate the purpose to hold the certificates so acquired, “ with all the rights and privileges belonging to them, as fully and unimpaired, as if held by other parties.”

The judgment at Special Term should be, in all respects, affirmed.

Bosworth, J.—The

first question of importance, raised by the appeals of the Harlem Railroad Company, relates to the true construction of the trust conveyance, dated the 31st of October, 1849.

That question is this. Are the gross receipts, mentioned in the fifth article, to be applied directly to pay interest, and interest only, or are they to be applied, in the first instance, to pay such expenses, of operating the extension, as its receipts may be insufficient to pay ?

The second article requires the company to so keep their accounts, as to show two results. First, The earnings and receipts of the extension. Second, The receipts of the old road, from the business, from and to stations on the extension, to and from stations on the old road.

For the sake of brevity and clearness, the word “ extension” is herein used to denote the portion of the road to be constructed from Dover Plains to Chatham Four Corners; ■ and the phrase “ old road,” is used to indicate the residue of the road which had been completed, and was in operation before the trust conveyance was executed.

The third article, among other things, prescribes the mode of ascertaining the expenses of running the extension.

The fourth article provides, and declares, that the extension shall be credited “ with the whole receipts, from all sources, on the line thereof,” and that it shall be charged with “the actual cost of the number of miles run thereon, by freight and passenger cars,” and states the mode of ascertaining the amount of such “actual cost.” It then provides that the “residue” of receipts remaining, after paying such “ actual cost,” shall be appropriated “ to or toward the payment of the interest warrants on the said certificates, as the same shall become due and payable. '

By the fifth article, it is agreed, that if the net earnings of the" extension should be inadequate to the payment of the interest warrants, that certain gross receipts, so far as the same might be necessary for the payment of interest, should be applied, to an amount not exceeding three-fourths of such gross receipts.

Pausing here, to ascertain the results contemplated by the parties to the trust conveyance, from the terms of its provisions, it would seem to be clear, that all parties expected the receipts from the extension would exceed the actual cost of operating it. Hence, the fourth article provides for applying the surplus of such receipts, over and above the amount of such cost, to the payment of interest warrants, and makes such surplus the primary fund for their payment, and, if sufficient, the only fund for paying them.

An application of gross receipts, from another source, to the payment of interest warrants, is to be made, under the fifth article, in the event that such surplus, or, in other words, the net earnings of the extension, prove inadequate to the payment of the interest warrants, and in that event only.

If all parties did not contemplate, as a possible result, that the cost of running the extension would be greater than the amount of its earnings, then it was not possible, in any event contemplated by the parties, that the gross receipts, mentioned in the fifth article, should or could be applied to any object, except the payment of interest, eo nomine. For, if the extension had produced net earnings, it would necessarily follow, that the gross receipts could only be applied to satisfy the portion of the interest warrants not paid by such net earnings. By applying the gross receipts to pay that portion of the interest warrants, they would be applied directly to satisfy interest, and interest-only.

In reaching the true construction of the trust conveyance, it is deemed to be of some importance to ascertain, and keep in view, the results anticipated by all parties, as certain, so far as such results are free from reasonable doubt.

What effect, if any, shall be produced on the rights or liabilities of either party, if it shall appear that the actual results are widely different from those contemplated and confidently anticipated by all of them, is a question quite distinct from the meaning of the contract, when construed in the light of the facts exist- * ing, and of the views influencing the parties to it, at the time it was made.

It may be quite true, that neither party to the contract would have entered into it, as it reads, if his clear conviction of the results, from constructing and operating the road, had been such as the experiment has produced.

But that consideration does not aid us, in arriving at the true construction of the contract.

In the report of the company to its stockholders, made in 1850, it is said that, “ By this plan, the business of the road to Dover” (that is the business of the old road) “ remained free from liability for expenses or interest upon debt, the dividends upon the preferred stock incurred no new hazard, and were left upon the ample security now provided in the large and increasing business of the line, and the old stock had a new source of probable profit opened to it, free from all sources of danger to the present resources of dividend.”

Whatever cotemporaneous exposition of the views and anticipations of the railroad company is examined, so far as they are disclosed by the case, the company had no doubt, and exerted itself to convince others, that the earnings of the extension would be more than sufficient to defray the cost of running it.

Having that view unclouded by a doubt, and anticipating profits instead of apprehending an increased expenditure, and anticipating profits so confidently as to be prepared to give the comfortable assurance to the stockholders conveyed by the report made in 1850, the trust conveyance and its terms and provisions, in respect to the point now under consideration, were so drawn as to make a provision, by the fifth article, for the payment of interest which the provisions of the fourth article might be inadequate to satisfy.

The company was to provide cars and motive power, and operate the extension at all events. But the fourth article clearly indicates the view of the company, that the earnings of the extension would more than pay them the cost of running it. If they did not amount to enough to pay such cost, the difference would necessarily be so much loss to the company.

The only persons having an interest in the insertion in the trust conveyance of a further provision for the payment of interest, were the contractors, who were to construct the extension, and receive payment therefor in the two millions of certificates to be issued by the company.

Accordingly, the company, having, by the fourth article, provided a fund for the payment of interest, and a fund, too, which could not exist unless the extension should earn more than it would cost to operate it, but still a fund which the company had not the slightest doubt would arise from the extension alone, and would, therefore, pay some part of the interest warrants, agreed, that if such fund should be inadequate to pay interest in fall, enough of certain gross receipts to pay interest in full, should be so applied.

Hot contemplating the possibility of its costing more to operate the extension than it would earn,' it made no provision in its own favor, by the fifth article, based on such a contingency.

Such a provision as was made, was of importance to the contractors, even if the views, which the company sought to impress on its stockholders, should be generally acceded to. It would create a fund for the payment of interest in addition to that provided by the fourth article, and consequently create more confidence in the certificates, and increase the facility for negotiating them on better terms.

The form of the contract, found in the trust conveyance, strengthens this view of its meaning, and of the intent of the parties to it. If it were not true that the net earnings of the extension, and those earnings alone were designed and understood by the parties to be primarily the sole fund for the payment of interest, and if it had not been anticipated so confidently that 'the extension would earn more than it would cost to operate it, as to make it wholly unnecessary for the company to frame the terms of the contract so as to provide for a contrary result, as a probable one, it is difficult to assign a reason why the contract did not provide that the extension-should be credited, under the fourth article, with the gross receipts, and also with the whole receipts from all sources on the line of the extension," and tiiat it should be charged with the cost of operating it, and that the net earnings, thence arising, should be applied to pay the interest warrants.

The surplus, if any remained after paying the interest in full, would belong to the company, to be expended, as it pleased, for any lawful purpose.

But the whole structure of the contract found in the trust conveyance, and of the trust conveyance itseltj is based on this idea, which pervades all of its provisions.

The extension, when built, was to be represented by the two millions of certificates. The only mode of coercing payment of the principal of the certificates, is by a sale of the extension itself. Whatever dividend the price, at which it might be sold, would pay upon the certificates, to that extent they would be paid, and as to the proportion left unpaid, the certificates would be valueless.

So it was a prominent feature of this scheme or arrangement, that the extension should produce a fund, out of its earnings, for the payment of interest on the certificates semi-annually.

The contract as drawn, prior to reaching its fifth article, makes clear and full provision for ascertaining the amount of the fund to be thus produced, and for the application of such fund to pay interest. Its income, and the source of such income, is stated. The charges by which it may be affected, are enumerated and defined. The surplus anticipated from it, or the fund thence to arise, after deducting the defined charges, is appropriated, and its application directed.

There is.no provision, in any part of the contract, for charging to the extension account any expenses not authorized by the fourth article to be charged to it. Nor is there any provision for crediting it with income from any source other than the earnings of the extension.

But having defined clearly, and so clearly as to be exempt from obscurity, what shall be credited, and what shall be charged to the extension account, and contemplating that it cannot fail to produce a surplus, the fourth article makes that surplus a fund for the payment of interest.

The contractors, for their better security, and to have some resort for the payment of interest, if the fund provided for the purpose should be inadequate to pay it in full, obtained a further agreement, in the fifth article, that if that fund should not be large enough to pay interest in full, that other revenues, not exceeding" three-fourths of their amount, to such extent as they may be “ necessary for the payment of interest,” should be so applied.

I say so applied, because in drawing this fifth article, there was nothing to be provided for, having reference to the preceding articles of the contract, except that part of the interest, which the fund created by the fourth article might be insufficient to pay. Uothing was reasonably possible, according to the views of the parties, except that some interest might be left unpaid, after that fund had been applied.

Hence, as I think, a view of the whole contract, as well as the natural and obvious import of the language employed in it, leads to the conclusion, that the application of the gross receipts contemplated, intended and provided for by the fifth article, was an application directly to the payment of interest, and to the payment of interest only.

The provisions of the sixth, eighth and ninth articles, like those of the fifth, are mainly, if not exclusively, for the benefit of the contractors, and those to whom they might transfer the certificates.

It is difficult to find, in any provision subsequent to the fourth article, any clause, apparently designed or adapted to relieve the company from the expenses or consequences of any acts which it had contracted to do by the fourth article, and the articles preceding it.

The sixth article declares what the holders may require, and what the company must do, if the whole fund, provided by the fourth and fifth articles for the payment of interest, shall be insufficient in any one year for that purpose, and how and when such deficiency shall be paid.

By the seventh article, when a year is reached, in which all interest accruing that year, and the deficiency of former years, shall have been paid in full, although a surplus of moneys applicable to that object shall remain, the accounts up to and for such year shall be closed, and such surplus cannot be resorted to, to pay any deficiency of interest subsequently arising.

The eighth article confers the right on the certificate-holders, in case the interest shall at any time be in arrear for two whole years, to have the extension sold and require the company to surrender possession of it to the purchaser.

But by the ninth article the company may be required, by such purchaser, to operate the extension on precisely the same terms that they have covenanted to operate it, for the benefit of the certificate-holders, before such a purchase shall be made.

The eleventh article is as stringent as the eighth and ninth, in the event of a sale of the extension after the time fixed for the payment of the principal of the certificate.

By the ninth and eleventh articles, the purchasers of the extension, for whichever of the two causes named a sale may be made, may run the extension as their own property, and on their own account, or compel the company to do it, on the terms mentioned from the second to the sixth articles inclusive.

If it be asked, if the company must be compelled to operate the extension on such terms, ánd apply its revenues Rom the old road to pay the cost of operating the extension; and even though they might not be sufficient for that purpose, the answer is, if by the clear meaning of their contract they have agreed to do so, they must perform it, or submit to such consequences as result Rom breaking a valid contract.

If it be said, that such a consequence may involve them in ruin, the answer is, if any be required, that it was their misfortune to make so unwise a contract, and though bankruptcy should be the consequence, it is a result which happens to individuals under like circumstances, and one which corporations cannot escape any more than natural persons.

If the construction given to this contract is clearly correct, then the company has no ground for claiming, that it has been induced to do acts to their prejudice by reason of the settlements of interest made, which should conclude the trustees and certificate-holders, Rom claiming the benefit of the contract as now construed.

Upon the construction here given, the company should have paid money, instead of issuing deferred warrants. They had money in hand sufficient to pay interest in full, which it was their duty to have paid, and the right of the certificate-holders to demand.

They have done nothing, therefore, to affect themselves prejudicially, as between themselves and the certificate-holders.

That the stockholders may have received some of the money which should have been paid to the certificate-holders, or that the company may have used it to buy cars, or erect dépóts, or pay the expense of other improvements, is no reason why they should not pay the certificate-holders that which was, at the time of all of these settlements, then due, and at none of which they were paid all that was truly due.

If I regarded the true meaning of the contract so ambiguous or doubtful, that the construction claimed by the company was as well supported, by a just and fair view of all the provisions of the contract, as that now claimed by the certificate-holders, I should feel at liberty—if it appeared that the parties to it had, year after year for several years, with a full understanding of all the facts, practically given it one construction, by settling in conformity to it—to hold, that it meant what the parties, by such acts, had demonstrated that they understood it to mean.

Especially would it seem to be reasonable, when the parties, claiming a construction adverse to the one they had given to it in practice, had from time to time, as such settlement occurred, relinquished claims as important as they would have done in this case, and thereby without a cause, unless the practical construction was the true one, have so far depreciated their certificates as to make them unmarketable, when the new construction claimed, if the true one, and according with the real intent and understanding of the parties at the time of the contract, would have made the certificates command a premium in the market.

- But I regard the true meaning of this contract to be free from reasonable doubt.

Neither the facts found, nor the evidence given, warrant the conclusion, that any such practical construction has been deliberately and understandingly given, to the contract in question, as the company claims to be the true one, by the original parties to it, or by the certificate-holders, with a full knowledge of the details resulting from operating the extension.

In Cary v. The Harlem Railroad Company, the Court states, that It was not shown that any of these accounts and statements were delivered to the trustees, or shown to the certificate-holders prior to September 26th, 1853.” It'is not stated when, thereafter, they were shown to either of them.

The Court adds, it was given in evidence, That on the 25th day of September, 1855, the said defendants, Knapp, Ketchum and Holley, as trustees, were notified that the said accounts and documents were ready for their inspection, and that the plaintiff was so notified on the 26th of said September.” That action was commenced on the 26th of September, 1855. In the case of Knapp and others v. The Harlem, Railroad Company, the case, in this respect, is no stronger, on the part of the defendants.

The opening of the extension took place on the first of April, 1852.

The full interest due on the 1st of July, 1852, was paid in cash.

No interest was paid on the 1st of January, 1853, it being claimed, that the whole receipts were absorbed by the expenses.

The company, in their answer, allege, and the Court found, that, “ upon the completion of said extension,” they purchased of the said certificates, to the amount of $1,000,000, and subsequently, from time to time, the further amount of $533,500, all of which they now hold.

If the $1,000,000 of certificates were bought by the company, immediately upon the completion of the road, that amount was purchased before any such statement as is required by the third article, had been drawn up, and for aught that is stated in the answer, or found by the Court, the same may be true of the additional $533,500.

It does not appear, that the original contractors held any of the certificates on the 1st of January, 1853, or that there has been any transaction between them and the company since the extension was completed, which would be in any, way affected by either construction of the contract.

It is not found directly, nor proved affirmatively by any witness, that any of the certificate-holders, either about the 1st of January, 1853, or subsequently, before these actions were commenced, actually examined any of the semi-annual statements, made by the company, or the trust conveyance.

It cannot, therefore, justly be said, that the certificate-holders ever (and they were not parties to the contract,) actually examined the semi-annual statements, and accepted part payment of the interest in cash, and deferred warrants for the residue, with distinct knowledge, that the company had applied, or construed the contract, as giving them a right to apply the gross receipts to pay the expenses of running the extension.

That they had an opportunity to examine them, and to obtain a copy of the trust conveyance, and compare them with its provisions, so as to determine for themselves, before receiving the deferred warrants, whether they had a right to demand cash, may be conceded.

But, so long as it does not appear, that any thing of the kind was done, the most that can be claimed is, that they acquiesced in the results, which the company stated to be the true and actual results, without making any such examination of a long and special trust conveyance, to which they were not parties, as would be required by one who was something more than an ordinary man, and possessing a better than a common understanding, to ascertain their rights, however clear they might seem to be, on bestowing the necessary time and labor to comprehend them.

Even if I deemed the true meaning of the contract more doubtful than I now regard it, it would be difficult to hold, that the owners of the certificates have accepted deferred warrants, with such actual knowledge or examination of the contents of the trust conveyance, and with such examination of the semi-annual statements, as would justify the conclusion or position, that they had, by their acts, given a practical construction to the contract.

I think that no such consequence can be given to the settlements of interest, and the facts proved in relation to them, or connected with them, as should preclude the certificate-holders from insisting upon, and having the benefit of the contract, according to its true construction.

Entertaining these views, and remaining of the opinion, that there is no personal liability resting on the company, for the payment of' the certificates, and that they are, in equity, entitled to the same rights, in respect to the certificates they have purchased, as any other holder of any of the certificates, I think both judgments should be wholly affirmed.

All the Judges, who heard the case of Knapp and others v. The Harlem, Railroad Company, having concurred in the conclusion, that the judgment in that case should be affirmed; it follows that the judgment, in the other action, must also be affirmed.

Woodruff, J.—

When the case of Cary v. The N. Y. & Harlem Railroad Company, et al, was argued, it was understood, that upon all points in controversy, it presented the same questions which had already been discussed at a previous General Term, in the case of Knapp and others v. The N. Y. & Harlem Railroad Company, before Justices Duer, Bosworth & Slosson, and that both cases should be decided, upon consultation, between all the Judges who heard the arguments in either case.

It would therefore suffice for me to say, in addition to what has been said by Mr. Justice Bosworth, who sat with me in this case, that all of the other Justices concur in affirming the judgments, for reasons stated in one or both of the opinions pronounced by him and by Mr. Justice Slosson respectively, and that therefore the judgment in this case must be affirmed.

I feel nevertheless reluctant to affirm a construction of the contract made by the defendants, the Harlem Railroad Company, to which I think they never have, in fact, intelligently assented, and to which they were never supposed to have assented by those with whom they contracted—a construction, which, in its practical result, devolves upon the company an onerous burden of expenses, which they would not have agreed to bear, and which those with whom they contracted did not expect them to bear.

If it be insisted that an exigency has arisen, that neither party, at the time of the making of the contracts, supposed to be possible, and against which the company have not perhaps sufficiently guarded and protected themselves, it may be answered, with some plausibility at least, that the minds of the parties have not met and concurred in any arrangement which devolves a heavy and unexpected burden, and a certain heavy loss upon the company. And again, if it be conceded that an exigency has arisen which neither of the parties contemplated, is it not a just and safe rule to govern the construction of their contract, in such an exigency, to follow the plain design, intent and spirit of the agreements, if that can be clearly ascertained ?

It is true, that if the words of the contract are entirely plain, and are susceptible of only one construction, there is an end of discussion, and we have no inquiry to make after the intention of the parties. In such case, the agreement speaks the intention, and conclusively proves, that the parties meant what they expressed, andthat in the intention, so expressed, the minds of the parties did meet and concur.

There is strong evidence in the whole structure of the agreements, and set forth in the deed of trust, embracing the whole arrangement for the construction of what is called “ the extension,” from Dover Plains to Chatham Four Corners, that the company and the contractors both intended that such extension, if made, should be made without expense or cost to the then stockholders, and without any hazard to them that the income, derivable from the old'road, in its then condition, should be reduced thereby.

The inducement to such extension was, however, the hope that the business done thereon, together with the business thereby brought to the old road, would not only pay the cost of such extension and the interest thereon, but yield an additional income for the benefit of the stockholders.

The same evidence makes it probable, that those who contracted to build the extension assumed the risk of obtaining ultimate payment from the proceeds of the business so done,, and that the price, or consideration for such building, was fixed in view of that hazard.

It is undoubtedly true, that, if the words of the contract will not admit of an interpretation corresponding with such an understanding in the minds of the parties, the words must control, not-, withstanding, any probable supposition, respecting their intent, inferable from the scheme which they would otherwise seem to have had in view.

But that the scheme of all parties was such as is above intimated, is very distinctly indicated by the character of the arrangement, unless the sections of the deed of trust, which are especially relied upon in the opinions of my brethren, plainly express the contrary.

In order to judge whether those sections must necessarily receive such a construction, let it be, for a moment, assumed that the parties intended that the business done upon the extension, together with the business contributed to the old road by such extension, or by reason of its being built, should alone be applied to the repayment of its cost, and to the interest thereon, and that the old road, or those then interested therein, should not be subjected to any loss by reason of the extension proposed.

Assuming that this was the intention of the parties, what stipulations were necessary to- secure this result? Obviously, first, that the corporation should not be personally or absolutely liable for the cost or the interest thereon.

Second.—That an account should be kept, which should show what were the actual expenses of maintaining and operating the extension, when finished.

Third.—That an account should be kept which should show the receipts from business done exclusively on the extension.

Fourth.—That an account should be kept of all business which could be properly said to be contributed to the old road, by, or in consequence of the building of the extension—which would embrace the carriage of any goods or passengers which came from any place on the extension, (i. e., above Dover Plains,) or which was destined to any such place, and which business, it might reasonably be presumed, would not come to the old road at all, if the extension was not built.

But as this business, so resulting to the old road, from the building of the extension, could not be done without cost, it would be proper to make some allowance for such cost, and so give to the extension all the profit, as justly owing to such building thereof. And, inasmuch as the old road was in actual operation, and the company was actually then incurring the expenses of running the same, it might fairly be assumed, that the carriage "of the last-mentioned goods and passengers would not greatly add to their running expenses; and, therefore, the deduction to be made from the gross receipts, for the cost of this last-named portion of the business, so contributed by the extension, should be small.

Fifth.—The result of the last-named three accounts, to wit: the cost of running the extension, on the one hand, and the receipts for business done on the extension, and the receipts for business so contributed, by the extension, to the old road, on the other hand, would exhibit the whole actual net income, which could arise from the proposed extension of the road, and a fund would be exhibited, which could be appropriated to the cost of the extension, and the interest thereon, without involving the old road, or those interested therein, in any hazard of loss.

And finally, if this fund should not be sufficient to pay the cost of the extension, the holders of the debt, created for its construction, might be allowed to take the extension itself, and run it for their own benefit, or permit the company to run it, accounting for all its earnings, and the profits resulting from its building, according to the plan so provided for. ,

It is plain, that such an arrangement would secure the accomplishment of the intention assumed.

Do the provisions of the trust deed, when examined, appear to conform to the scheme here indicated? or, are they inconsistent with it ?

I. It was held below, and we are all agreed, that the provisions of the contracts are such, that the corporation is not absolutely liable for the cost of the extension, or the interest thereon. If they faithfully account for, and apply the moneys received by them, which are applicable thereto, they are not liable to make up any deficiency. The first point is, therefore, secured.

II. -' The first recital in the trust conveyance, declares an intent to provide the manner in which the certificates issued for the cost of the extension, and the interest thereon, shall be paid; that is to say, from the fund thereinafter provided—i. e., one fund ; and they are to be chargeable thereon.

The condition of the conveyance declares, that it shall cease and be void, if the company shall pay the certificates and interest “ out of the proceeds and earnings of said road, as hereinafter providedthat is to say, out of the fund about to be described, and a fund that is to arise from proceeds and earnings.

III. What, then, is to constitute the fund ? and how is it to be ascertained ?

By the “second” covenant in the trust deed, the company agree so to conduct and arrange their system of business, as to exhibit clearly:—1st. “ The earnings and receipts of that part of the said railroad hereinbefore described,” i. e., the extension. 2d. “ The receipts of the present road, from the business from and to stations on that part of the road herein described, to and from stations on the present road.” Eor what purpose? “In order that the whole income of and from the road herein described may be ascertained.” Here is a definition of the fund upon which the certificates and interest are chargeable, as stated in the recital—and a clear statement of what is meant in the condition, by “ out of the proceeds and earnings of said road.”

The “ whole income of and from the road herein described,” is, therefore, to consist not merely of the earnings and receipts of the extension, i. e., from business done upon the rails thereof; but also of the earnings and receipts of the present road, from business, from and to stations on the extension, to and from stations on the old road, which, it might be assumed, the company would not have received, if the extension had not been made.

It is then, “ third,” provided, that .the account of the current expenses shall be so kept as to ascertain the cost per mile of operating and maintaining the whole road, and “ thereby ascertain the amount chargeable against the income of that part of the road hereinbefore described.” It is clear, that if the income here spoken of is the same as is described in the second article, there is an end of the question. By the second clause, “ the whole income of and from the road herein described” is to be ascertained. The road herein described is the extension “ from Dover Plains to Chatham Four Corners.” That income embraces not merely. what is derived from business done between the termini of the extension, but also the business which, originating or terminating on the extension, is due to its construction and properly belongs to it as income. And when the whole income is so ascertained, then, by the third article, the expenses of maintaining and operating the extension are declared to be chargeable to that income. If, by these clauses, the company have defined the whole fund, out of which the interest on the certificates is to be paid, and have made the expenses chargeable thereto in the first instance, they have accomplished the object in view. They have given up, to the payment of the interest, all the income derivable, actually or constructively, from such extension. And in accordance with this view of the meaning of these clauses, the company have heretofore, for many years continuously, after the extension was completed, kept their accounts and paid over the balance thereof without objection or question.

But it is supposed, that the fourth and fifth covenants in the trust conveyance are inconsistent with an intent to charge the whole expenses of operating and maintaining the extension to the whole income derived in the manner above stated.

It is not difficult to reconcile any seeming discrepancy. If the above view of the meaning of the previous provisions be correct, the company had made the whole income of the extension liable to the payment of the interest on the certificates, as security to the holders thereof, and had made the expenses of the extension chargeable against such income, so that the certificate-holders were assured that they should, to the extent of such interest, have the whole of such income, and the stockholders in the old road would see that what was so appropriated to the cost of the extension was not in diminution of the income already derivable from the old road.

But in assenting to this arrangement the company had secured to themselves a further advantage. It was foreseen, that it might happen that the “whole fund” so provided might not be sufficient in some years to pay the interest, and in other years there might be a surplus; and by the “ seventh” provision it was provided, that when, in any year, that year’s interest should be paid in full, the account of that year should be closed—the surplus, if any, should not be liable for the deficiency of any future year, but might be disposed of as the company saw fit.

And again, it was úndoubtedly anticipated that the receipts on the line of the extension would, alone, be sufficient for the payment of the interest.

There is, therefore, at least, great plausibility in the argument that the fourth and fifth covenants were not intended to change in any manner the application, of any portion of the fund created, from the payment in the first instance to the payment of the expenses of the extension, but only to define how and in what order, in stating the account of the fund, the two branches or portions thereof, already above defined, should be brought into it.

First, (by the “fourth” article,) they should credit to the fund the whole receipts, from all sources on the line thereof, i. e., between its termini, and charge the expenses to be ascertained as above stated. It was doubtless expected, that the balance would pay the interest, and it was to be applied to that purpose. If it should prove sufficient, there would be no occasion to resort to any business done on the old road, although contributed thereto by, or by means of building, the extension. But if it should prove insufficient, then, second, (by the fifth article,) they should apply the second branch of the fund, already defined as forming a part of the whole income of the extension, viz.: three-fourths of the gross receipts from business done over the present road, from and to stations thereon, to and from stations on the extension. (Thus reserving one-quarter, to indemnify the old stockholders for the absolute expenses of doing this last branch of business over the old road.) What is meant by “ apply” as here used ? It is said, with great force, it means apply directly to the deficiency of interest. But, looking back to the second article above referred to, where this identical branch of their revenue is agreed to be stated, in order that the whole income” may be ascertained; to the words of condition in the conveyance; and the recital where the certificates are made chargeable upon the whole fund herein provided; and again, to the third article, where the expenses are said to be chargeable against the “ income,” it is not necessary so to construe these words: it much more nearly accords with the apparent design of the parties to say, that it means apply to the fund, i. e., apply to the account stated in the fourth article, thus making the whole income of the extension derived from the two sources applicable, first, to the expenses, and then to the payment of the interest on the certificates.

And this is in harmony with another apparent purpose, applicable to this particular part of the receipts : it was not to enter into the account, any further than might be necessary for the payment of interest; and it is not clear, that it could be claimed at all, for the creation of a surplus.

And once again, that it was to be applied to the fund, as one fund, applicable, first to expenses, and then to interest, is indicated by the fund being always spoken of as single and entire. It is when the “ whole fund,” embracing both classes of receipts, and so made up, is deficient, that, by the sixth article, deferred warrants are to be issued. The application, then, mentioned, in the fifth article, is an application to the account, and made by crediting in the account of the fund, in which are already credited the other class of receipts, (as mentioned in the fourth article,) so much of the receipts of the old road, from the business described, as is necessary to make the balance of that account adequate to the payment of the interest.

The practical result of this view of the contract, is to appropriate to the payment of interest the actual net receipts arising from the building of the extension, and its contribution of business to the old road, and no more. And that this, and nothing more than this, was the precise understanding of the parties, and the declared interpretation, of these clauses of the trust deed, appears, in very terms, in the eleventh article of the covenant, where it is provided, that if the certificates be not paid, the holders may, themselves, require a sale of the extension, or may require the company to operate and maintain the extension, upon the same conditions and provisions for the “ application of the net receipts therein arising,” for a further term of twenty years. It was net receipts, i. e., the balance of the receipts, over and above the expenses, which, the whole scope of the arrangement contemplated, should be secured to the certificate-holders, for the payment of interest.

And this they have received by the manner the receipts have heretofore been accounted for.

Cotemporaneous exposition, of the meaning of the contract, was giv.en by the parties in conformity with these views.

The construction of the contract now claimed, involves the company not only in the loss of the expenses of operating the extension while the certificates are running to maturity, but, as the case may be, during the continuance of the charter of the company, notwithstanding the certificate-holders may cause the extension to be sold, and the company lose all title thereto, since they may still be required to maintain and operate the same for the benefit of the purchasers.

These seem to me strong reasons for rejecting the construction of the contract for which the plaintiff contends, and for believing, that neither the defendants, nor the parties with whom they contracted, ever contemplated any such construction, or agreed to any contract understood to bear such an interpretation.

The conclusions of my brethren, however, on this subject, are controlling; and if I were to confine my attention, solely, to the reading of the fourth and fifth articles, I should be constrained to say, their views were most in accordance with their literal interpretation.

Judgments affirmed with costs.