text:
Insurance Company v. Gossler

ERROR to the Circuit Court of the United States for the District of Massachusetts.

The plaintiff, the Delaware Mutual Safety Insurance Company, was insurer of a cargo of sugar on board the 'Frances,' from Java to Boston. After leaving her port of departure, the vessel encountered a hurricane, which compelled her to proceed to Singapore, where she was repaired and fitted to continue the voyage.

To meet the expenses of repairs, the master was obliged to borrow at Singapore the sum of $26,055.43, Singapore currency, and to execute, on the twelfth day of July, 1872, a bottomry bond for that sum, with marine interest at twenty-seven and a half per cent, upon the vessel and freight.

The bond contained the following stipulation:--

'Provided, nevertheless, and it is hereby agreed, that if, in the course of the said voyage, an utter loss of the said vessel by fire, lightning, enemies, men-of-war, or any other perils, dangers, accidents, or casualties of the seas or navigation, shall unavoidably happen, then the said loan and interest shall not be payable, and all parties liable therefor shall be wholly discharged therefrom, and the loss shall be wholly borne by the said lenders or bondholders, and every thing herein contained for payment thereof shall be void and determined; save and except only, and provided in such case, that the said lenders or bondholders shall be entitled to such average as can be hereby lawfully secured to them on all salvage recoverable in respect to the said vessel, freight, and goods, or any of them.'

The vessel sailed from Singapore for Boston, encountered a storm in the month of December following, and was cast ashore on Cape Cod, Mass.

The defendants, Gossler & Co., who were agents of the bondholders and assignees of the bond, succeeded in saving somewhat less than half the sugar on board, and forwarded it to Boston.

The vessel, as she lay upon the beach, was surveyed, and, having been found incapable of repair, was broken up, and her materials were sold. When she was sold, she lay 'on the beach, full of water, as high as she could, but so low as to be submerged at high-water.' The chains and anchors, sails and rigging and hull, were sold separately, at auction, by the underwriter, in January, 1873: the chains, anchors, and other utensils bringing $1,494.75; the sails and rigging, $2,323.70; and the hull, $2,000.

Upon learning of the disaster, the owners of the cargo made abandonments in writing to the plaintiff as the underwriter thereon, and claimed payment for a total loss under their respective policies.

The letters of abandonment were dated, respectively, Dec. 28, 30, and 31, 1872.

In March, 1873, the plaintiff paid to each owner the amount of a total loss under his policy; and received on the same date, from them so insured and paid, an assignment and transfer in writing of 'the sugar of said owners, and all their right, title, interest, trusts, claim, and demand therein and thereto.'The defendants, as agents of the bondholders, with the consent of the owners of the cargo, proceeded to sell the sugar saved; and now hold the proceeds, claiming them on account of said bond, such proceeds not being sufficient to satisfy it. The plaintiff having, at all times, claimed them, as the underwriter who accepted abandonments and paid a total loss thereon, brought this action to recover them.

The case was tried by the court below; and, judgment having been rendered for the defendants, the company brought the case here.

The facts show an 'utter loss' of the vessel. Thompson v. The Royal Exchange Assurance Co., 1 M. & S. 30; The Elephanta, 9 Eng. L. & Eq. 553; Joyce v. Williamson, 3 Doug. 164; Pope et al. v. Nickerson et al., 3 Story, 465; Murray v. Hatch, 6 Mass. 464; Cambridge v. Anderton, 2 Barn. & Cress. 691; Roux v. Salvador, 3 Bing. N. C. 266; 2 Arnould, Ins., sect. 364, 365; Marshall, Ins. 446; 2 Parsons, Mar. Ins. 73; 2 Phillips, Ins., sect. 1485; Barker v. Janson, Law Rep. 3 C. P. 303; Walker v. Protection Insurance Co., 29 Me. 317; Gardner v. Salvador, 1 Moo. & R. 116; Irving v. Manning, 1 H. L. Rep. Cas. 287; Mullett v. Shedden, 13 East, 303; Cambridge v. Anderson, Ry. & M. 60; Poole v. The Protection Insurance Co., 14 Conn. 46; Tudor v. New England Mutual Marine Insurance Co., 12 Cush. (Mass.) 554; Hugg v. Augusta Insurance & Banking Co., 7 How. 595; Dyson v. Rowcroft, 3 Bos. & Pul. 474; Appleton v. Crowninshield, 3 Mass. 443; Peele v. Suffolk Insurance Co., 7 Pick. (Mass.) 254; Peele et al. v. Merchants' Insurance Co., 3 Mason, 27; Crosby v. New York Mutual Insurance Co., 5 Bosw. (N. Y.) 369; Stagg v. United Insurance Co., 3 Johns. (N. Y.) Cas. 34; Coit v. Smith, id. 16.

The utter loss of the vessel having avoided the bond, the holders of it had no right, under its terms, to the proceeds of the cargo saved from the wreck. 1 Parsons, Mar. Ins. 221; 2 Park, Ins. 628, 629; 2 Phillips, Ins., sect. 1488; Joyce v. Williamson, 3 Doug. 164; Robertson & Brown v. United Insurance Co., 2 Johns. (N. Y.) Cas. 250; Appleton v. Crowninshield, 8 Mass. 340; Thorndike v. Stone, 11 Pick. (Mass.) 183; Bray v. Bates and Another, 9 Metc. (Mass.) 237; The Insurance Company of Pennsylvania v. Duval and Another, 8 Serg. & R. (Pa.) 138; The Virgin, 8 Pet. 538; The Hunter, 1 Ware, 251; Parsons, Mar. Law, 420, and cases cited; Marshall, Ins., c. 13, sect. 7; Stephen v. Broomfield, L. R. 2 P. C. 516; Columbian Insurance Co. v. Ashby, 13 Pet. 331; Gray v. Waln, 2 Serg. & R. (Pa.) 229.

Mr. Charles A. Welch, contra, cited The Virgin, 8 Pet. 538; 3 Kent, Com. 359, 360; 2 Arnould, Ins., sect. 392; 1 Phillips, Ins., sect. 1170; Abbott, Shipp., p. 126; Maude & Pollock, Shipp., p. 440; Maclachlan, Shipp., p. 57; Hopkins' Hand-Book of Average, p. 93; Crump, Mar. Ins., sect. 147; Thompson v. The Royal Exchange Assurance Co., 1 M. & S. 30; The Great Pacific, Law Rep. 2 Ad. & Ec. 381; S.C.. Law Rep. 2 P. C. 516; Broomfield v. Southern Insurance Co., Law Rep. 5 Ex. 192; The Insurance Company of Pennsylvania v. Duval and Another, 8 Serg. & R. (Pa.) 138; Delaware Insurance Co. v. Archer, 3 Rawle (Pa.), 216; The Catherine, 1 Eng. L. & Eq. 679; The Elephanta, 9 id. 553; Bynkershoek, Quaest. Pub., lib. 3, ch. 16; The Dante, 2 W. Rob. 427; Stephen v. Broomfield, Law Rep. 2 P. C. 516.

Mr. William G. Russell and Mr. Charles M. Reed for the plaintiff in error.

MR. JUSTICE CLIFFORD delivered the opinion of the court.

title: Insurance Company v. Gossler


text: Talk:Insurance Company v. Gossler

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/

title: Talk:Insurance Company v. Gossler


text:
Insurance Company v. Gossler/Opinion of the Court

Maritime hypothecations had their origin in the necessities of commerce, and they are said to be the creatures of necessity and distress. When properly authorized and duly executed, they are of a high and privileged character, and are held in great sanctity by maritime courts. The Vibilia, 1 W. Rob. 1; The Rhadamanthe, 1 Dod. 201; The Hero, 2 id. 139; The Kennersley Castle, 3 Hagg. 1.

Instruments of hypothecation are usually executed by the master, he being regarded as the agent of the owner; the rule being that the owner is bound to the performance of all lawful contracts made by the master relative to the usual employment of the ship, and to the repairs and other necessaries furnished for her use. The Aurora, 1 Wheat. 96.

Contracts of the kind are authorized in emergencies, for the purpose of procuring necessary repairs and supplies for ships which may happen to be in distress in foreign ports, where the master and the owners are without credit, and where, unless assistance can be procured by means of such an hypothecation, the voyage must be broken up, or the vessel and cargo must perish. Burker v. The Brig M. P. Rich, 1 Cliff. 308.

Such an hypothecation of the vessel by the master is only authorized when based upon necessity. And the required necessity is twofold in its character: it must be a necessity of obtaining repairs or supplies in order to prosecute the voyage, and also of resorting to such an hypothecation from inability to procure the required funds in any other way. Thomas et al. v. Osborn, 19 How. 22; The Hersey, 3 Hagg. 404.

Sufficient appears to show that the plaintiffs were the underwriters on the cargo of the bark 'Frances,' consisting of sugar, on her voyage from Java to Boston; that, in due course of navigation, the bark sailed from a port of Java, duly laden, for her return port; that she soon encountered a hurricane, which compelled the master to cut away her masts to save the vessel, and to put into a neighboring port for repairs, from whence it became necessary for the bark to proceed to the port of Singapore to fit the vessel to continue the voyage. Destitute of funds to pay the expenses incurred for the repairs, and without credit, the master was obliged to execute a bottomry bond there for the sum necessary to liquidate those expenses, with marine interest at twenty-seven and one-half per cent, upon the bark, cargo, and freight. All matters of the sort having been adjusted, the bark sailed from the port of Singapore for the port of Boston; but, before she reached her port of destination, she encountered a storm, and in the month of December of that year was wrecked and driven ashore on Cape Cod. Prompt measures for saving as much as possible from the wreck were adopted by the defendants, who were the agents of the bondholders or the assignees of the same; and it appears that they succeeded in saving nearly half of the cargo, which was sent forward to Boston, and was subsequently sold with the consent of the owners.

Subsequent to the shipwreck, the bark was surveyed as she lay upon the beach; and, being found to be incapable of being repaired, she was broken up, and her material was sold in separate parcels, including the hull, chains, anchors, sails, and rigging; and, when the owners of the cargo were informed of the disaster, they made abandonment in writing to the underwriters, under each policy of the respective dates, as stated in the agreed statement, claiming payment on each policy as for a total loss. Pursuant to that claim, the plaintiffs, as such underwriters, paid to the insured owners of the cargo the amount as for a total loss under each policy, and received from the owners an assignment and transfer in writing of the sugar of the owners, and of all their right, title, and interest in the same.

Two other matters are admitted: 1. That the defendants hold the proceeds of the sugar, the amount being less than the amount of the bond. 2. That the plaintiffs accepted the abandonments tendered by the owners of the cargo, and have at all times claimed what was saved of the cargo.

Payment being refused, the plaintiffs brought an action of assumpsit against the defendants for money had and received, and the parties submitted the case to the Circuit Court, upon an agreed statement of facts. Hearing was had, and the Circuit Court rendered judgment for the defendants, and the plaintiffs sued out the present writ of error.

Due execution of the bond in question is conceded; nor is it questioned that the circumstances were such at the time as to give the master the power to make the loan, nor that the bond by its terms covers the cargo and pending freight as well as the bark, unless an utter loss of the vessel occurred during the voyage.

Authority of the master to hypothecate the ship and pending freight in such a case, whenever, within the meaning of the maritime law, it becomes necessary to enable him to complete the enterprise in which the ship is engaged, was never doubted, whether the occasion arises from extraordinary peril or misfortune, or from the ordinary course of the adventure. Nothing but necessity can be a proper foundation for such an hypothecation. And that necessity, as before stated, must be twofold in its character: first, it must be a necessity of obtaining repairs or supplies in order to prosecute the voyage; secondly, it must be a necessity of resorting to a bottomry bond, from inability to procure the required funds in any other way. The Hersey, 3 Hagg. 404; The Fortitude, 3 Sumn. 234; 1 Conkl. Adm. (2d ed.) 269; Abbott, Shipp. (11th ed.) 126.

Ship-owners appoint the master, and they are in general responsible for his acts; but the general rule is different as to the cargo, in respect to which the master is the mere depositary and common carrier, whose whole relation to the goods consists in his obligation of due conveyance, safe custody, and right delivery.

Viewed in that light, it was supposed at one time that the master had no power to hypothecate the cargo to raise funds to prosecute the voyage, whatever the necessity might be; but the rule is now well settled the other way, that the hypothecation may extend to the cargo as well as to the ship and freight. The Lord Cochrane, 1 W. Rob. 313; The Gratitudine, 3 C. Rob. 240; The Packet, 3 Mason, 257; The Zephyr, id. 343; The United Insurance Co. v. Scott, 1 Johns. (N. Y.) 105; Fontaine v. The Colombian Insurance Co., 9 id. 29; Searle v. Scovell, 4 Johns. (N. Y.) Ch. 218; The American Insurance Co. v. Coster, 3 Paige (N. Y.), 323.

Bottomry bonds, when given bona fide and for legitimate purposes, are to be liberally protected. It is important for the interests of commerce that a master in a foreign port, standing in need of assistance, arising out of some unforeseen necessity, to complete a voyage, and having no credit, should for that object be invested with authority to pledge the ship, and charge upon it the repayment of the loan in case of her safe arrival. The Reliance, 3 Hagg. 66.

Beyond all doubt, the bond in this case hypothecates the cargo as well as the vessel and the unpaid freight by way of bottomry, as security for the payment of the loan on the terms and conditions specified in the instrument, which are as follows: 1. That the vessel shall proceed, and complete her voyage without unnecessary deviation. 2. That the principal and marine interest shall be paid in the manner specified, within three days after the safe arrival of the vessel at the port of destination, and before the cargo is landed or the freight collected. 3. That the cargo shall not be landed nor the freight collected until the payment is made, and that the bondholders for the time being shall have the privilege of enforcing those conditions. 4. That interest on the aggregate amount at the current rate in the port of destination shall be paid in case of failure to discharge the amount of the principal and marine interest as stipulated.

Superadded to those terms and conditions is the following stipulation, in the form of a proviso: that if in the course of the voyage an utter loss of the vessel by fire, lightning, enemies, men-of-war, or any other perils, dangers, accidents, or casualties of the seas or navigation, shall unavoidably happen, then the loan and interest shall not be payable; and all parties liable therefor shall be wholly discharged therefrom, and the loss shall be wholly borne by the lenders or bondholders, and every thing herein contained for payment shall be void and determined, save and except only, and provided in such case, that the lender or bondholders shall be entitled to such average as can be hereby lawfully secured to them on all salvage recoverable in respect to the vessel, freight, and goods, or any of them.

Difference of opinion exists among Continental writers as to the meaning of the exception at the close of the preceding condition; but the great weight of authority, even from that source, is, that the holder of the bottomry bond is preferred over the insurer or owner, to the extent of his legal claim for principal and marine interest secured by the bond. 3 Boulay Paty, Cours de Droit Commercial Maritime, 183.

Instead of that, Valin holds that the lender on bottomry is entitled in such a case only to such a proportion of the value of the property salved as the sum loaned bears to the whole value of the property hypothecated. Pothier and Em erigon concur with the writer first named; and the Court of Privy Council Appeals decided, that, if the vessel is lost, the lender on bottomry, though his remedy is limited to the value of the property salved, is entitled to the whole of what is saved, provided it was included in his security. Stephens v. Broomfield, Law Rep. 2 P. C. 522; 2 Em erigon, Trait e des Assurances Maritimes et des Contrats  a la grosse, 544.

Much discussion took place in the preceding case, as to the meaning of the stipulation in the closing part of the condition of the instrument, which was quite similar in legal effect to the closing exception in the present case; the contention being there, as here, that it gave the owners of the ship or cargo, as the case may be, the right to share in the salved property: but the court, without hesitation, rejected the proposition; holding that the theory involved a forced construction of the stipulation, utterly inconsistent with such a maritime contract, and that it reserved no such right to the owners. The Great Pacific, L. R. 2 Ad. & Ec. 381.

Authorities to show that the doctrine of constructive total loss is in no respect applicable to such a contract are numerous, unanimous, and decisive. Thomson v. The Royal Exchange Assurance Co., 1 M. & S. 30.

In the case of bottomry, said the Chief Justice in that case, nothing short of a total destruction of the ship will constitute an utter loss; for, if it exist in specie in the hands of the owner, it will prevent an utter loss: and text-writers of the highest repute adopt the same rule, and express it in substantially the same language. Nothing but an utter annihilation of the subject hypothecated, says Chancellor Kent, will discharge the borrower on bottomry; the rule being that the property saved, whatever it may be in amount, continues subject to the hypothecation. 3 Kent, Com. (12th ed.) 359; Williams & Bruce, Prac. 47.

Unless the ship be actually destroyed, and the loss to the owners absolute, it is not an utter loss within the meaning of such a contract. If the ship still exists, although in such a state of damage as to be constructively totally lost, within the meaning of a policy of insurance; or if she is captured, and afterwards retaken and restored, she is not utterly lost, within the meaning of that phrase in the contract of hypothecation. Maude & Pollock, Shipp. (3d ed.) 44; The Catherine, 1 Eng. L. & Eq. 679; The Elephanta, 9 id. 553.

Support to that view, of a decisive character, is derived from the case of Pope v. Nickerson (3 Story, 489), decided by Judge Story, where he says, that, in cases of bottomry, nothing but an actual total loss of the ship in the voyage will excuse the borrower from payment, not even when by reason of the enumerated perils the ship shall require repairs greater than her value; and he adds, that the proposition is fully borne out by authority; and he adopts and fully approves what was decided in the case of Thomson v. The Royal Exchange Assurance Company, to which reference has already been made, that the question in such a case is not, whether the circumstances were such as that, in case of insurance, the insured might have abandoned the ship, but whether it was an utter loss within the true intent and meaning of a bottomry contract; and he held that, in cases of bottomry, a loss not strictly total cannot be turned into a technical total loss by abandonment, so as to excuse the borrower from payment, even when the expense of repairing the ship exceeds her value.

Hypothecations of the kind are created by contract in writing, whereby the master of a vessel in a foreign port, not having any credit in the port where the vessel is lying, is enabled to obtain money for the repair and equipment of the vessel, and for necessary supplies for the prosecution of the voyage, by creating a charge or lien upon the vessel and freight, or upon the vessel, freight, and cargo, in favor of the lender; so that, if the vessel or cargo is sold or mortgaged by the owners, the property will be burdened with the charge or lien in the hands of the purchaser or mortgagee. Addison, Contr. (6th ed.) 275.

Contracts regularly created in that mode, and for that purpose, give rise to a maritime lien well understood in the civil law as existing, even without actual or constructive possession; the rule being, that, whereever a maritime lien of the kind exists, it gives a jus ad rem to the property to which it attaches, to be carried into effect by appropriate legal process. Such a contract does not transfer the property hypothecated; but only gives the creditor a privilege or claim upon it, to be carried into effect by legal process, in case the vessel arrives at the port or destination in safety. Abbbott, Shipp. (11th ed.) 128; The Tobago, 5 C. Rob. 218; Stainbank v. Fenning, 11 C. B. 88; Stainbank v. Shepard, 13 id. 417.

Where several securities of the kind are given upon the same ship and cargo, the rule is, all other things being equal, that they take effect in the inverse order of their dates; because it is supposed that the last loan furnished the means of preserving the ship, and that without it the prior lenders would have entirely lost their security. The Eliza, 3 Hagg. 86.

Subject to the rule that requires diligence in putting the bond in suit, securities of this nature, when the fund is deficient, take priority, as before remarked, in the inverse order of their dates; the ground for the preference of the later bonds to the earlier being the condition of necessity on which the validity of each is originally dependent. Which is applicable to the last as well as to the first, and is regarded as a safe reason for presuming that the one latest in date furnished the means for preserving the property for the earlier lender. Maclachlan, Shipp. (2d ed.) 5.

Liens of the kind are preferred to all other claims upon the property, except those arising from seamen's wages, the claims of salvors for subsequent service in saving the adventure, and the holder of a subsequent bottomry bond. The William F. Safford, Lush. 69; The Priscilla, id. 1.

Throughout, it should be borne in mind that the bond in this case covers the bark, pending freight and cargo, and that the controversy in the case has respect only to the proceeds derived from the sale of so much of the cargo as was saved by the efforts of the defendants. Where the bond only covers the ship, the lenders run no risk as to the cargo, as they must be paid if the ship arrives in safety, even though the whole cargo is lost; but, where the bond covers the cargo as well as the vessel, the lender, unless the condition is otherwise, is entitled to be paid even if the ship is lost, if enough of the cargo arrives in safety to pay the bottomry loan, the rule being that the maritime lien of the lender attaches to the entire property covered by the bond, or, to all that part of it which arrives at the port of destination in safety.

Actual total loss of the property by the described perils displaces the lien of the lender, and defeats his right of recovery; but the rule is, that, if the ship is once bottomried, the bond attaches to the very last plank, and the holder of the bond may have that sold for his benefit. The Catherine, 1 Eng. L. & Eq. 679.

Abundant authority exists for that proposition, and the court is of the opinion that the same rule is applicable to the cargo in cases where it is without condition covered by the bond. The Virgin, 8 Pet. 538.

Prior remarks are sufficient to show that the doctrine of constructive total loss is not applicable to contracts of bottomry, which serves very strongly to show that the maritime lien of the bondholder attaches to every part of the property covered by the bond, as seems to follow from all the authoritides upon the subject. Broomfield v. Southern Insurance Co., L. R. 5 Ex. 192.

Slight differences exist between a loan on the ship and a respondentia loan or loan on the cargo; but it is unnecessary to remark upon that distinction, as the bond in this case covers the bark as well as the cargo. 2 March. 734; Stephens v. Broomfield, 6 Moore, P. C. N. S. 161.

By the general marine law, the lender on bottomry is entitled to be paid out of the effects saved, so far as those effects go, if the voyage be disastrous. Appleton v. Crowninshield, 3 Mass 443.

Underwriters and lenders on bottomry stand upon a different footing, as was well explained at a very early period in our judicial history. Wilmer v. Smilax, 2 Pet. Adm. 299.

By an abandonment, the insurer is placed in the situation of the insured whom he represents, and can have no greater right than the insured would have had. Unlike that, the lender on bottomry loses his remedy only when the ship or other property hypothecated is wholly lost; and, where parts are preserved, such parts are esteemed his proper goods, being presumed to be the product of his money; and he, therefore, takes preference of the owner or insurer. In case of shipwreck, 'the owners are not personally bound, except to the extent of the fund salved which has come into their hands.' The Virgin, 8 Pet. 538.

'Utterly lost,' said Chief Justice Tilghman, is a strong expression; intended, as he held, to distinguish the case from one where the vessel is technically lost, as in case of abandonment. Such must have been his meaning; for he adds, that a ship is not utterly lost while she remains in specie in the hands of the owners. 'Had she been taken by an enemy, she would have been utterly lost to the owner,' unless she had been recaptured and restored. 'So, had she been burnt, or wrecked and gone to pieces,' unless some of her sails, masts, anchors, or chains had been saved. But she is not utterly lost merely because it may cost more than she is worth to repair her. Insurance Company of Pennsylvania v. Duval et al., 8 S. & R. (Pa.) 138.

Salved property, in case of wreck or other disaster, says Phillips, continues to be subject to the hypothecation; but, if the loss is by the perils assnmed by the lender, the borrower becomes discharged from all liability on his bond, excepting to the amount saved. Nothing short of a total loss will discharge the borrower. 2 Phillips, Ins. (5th ed.), sect. 1170.

High authority also exists for the proposition, that a total loss within the meaning of a bottomry bond cannot happen if the ship exists in specie, although she may be so much injured on the voyage as not to be worth repairing and bringing to the ultimate place of departure. Abbott, Shipp. (11th ed.) 126.

Bynkershoek defines such contracts to be a pledge of the vessel or other effects upon which the loan is made, and of what may remain of them after any event by which the personal responsibility is excused. Bynk., Quaest. Pub., lib. 3, c. 16.

From the moment of the accident, says Emerigon, the lender is seised of right to the effects saved, he having a special lien upon them for the payment of his debt, saving the freight and salvage; and the French ordinance is to the same effect, the rule there promulgated being that in case of shipwreck the security of the loan is reduced to the value of the effects saved from loss. Title 5, art. 17.

Decided support to the proposition that the lien extends to whatever is saved from the property covered by the bond is also derived from a case in which the opinion was given by Chief Justice Gibson, in which he expressly decided that the lender in a respondentia bond takes the risk only of a total loss, that any part of the property which arrives goes to the holder of the bond, without regard to whether it be great or whether it be small, so that it does not exceed the amount of the loan. The Delaware Insurance Co. v. Archer, 3 Rawle (Pa.), 226.

Rules of law defining the right of abandonment in cases of insurance do not apply in bottomry controversies, as there is no constructive total loss in the latter class of litigation. Instead of that, the rule is, that if the ship exists in specie, though in a state which would warrant an insured to make an abandonment, as where the cost of repairs would greatly exceed the value when repaired, the lender on bottomry may still recover; for the ship must be absolutely and wholly destroyed, in order to discharge the borrowers. 2 Arnould, Ins., by Maclachlan (4th ed.), 945.

Examined in the light of these authorities, it is clear that the bark in this case was not utterly lost within the meaning of the bottomry bond, when considered in view of the facts as they existed at the time the vessel was sold, and before she was voluntarily broken up by the purchaser. Subsequent acts of the purchasers cannot affect the right of the defendants; and, if not, then the proof is full to the point that the vessel existed in specie as she lay stranded on the beach. The Brig Draco, 2 Sumn. 157;

Shipwreck occurred in this case before the bark arrived at her port of destination: but the agreed statement shows that the vessel, though 'cast ashore,' still existed in specie, and that the voyage was terminated by a sale of the bark at an intermediate place; that she was surveyed subsequent to the disaster, as she lay upon the beach, and, though found to be incapable of repair, she was not an utter loss within the maritime rule applicable in such a case; nor can the act of the owners in making an abandonment as for a constructive total loss have any effect to conclude or impair the rights of the defendants as the holders of the bottomry bond.

Judgment affirmed.


text: Talk:Insurance Company v. Gossler/Opinion of the Court


text:
Ketchum v. Duncan Hays

APPEALS from the Circuit Court of the United States for the Southern District of Alabama.

The facts are stated in the opinion of the court.

The first case was argued by Mr. George Hoadly and Mr. E. L. Andrews for the appellants, and by Mr. John A. Compbell and Mr. F. N. Bangs for the appellees.

The second case was argued by Mr. John A. Campbell and Mr. F. N. Bangs for the appellants, and by Mr. George Hoadly and Mr. E. L. Andrews for the appellees.

MR. JUSTICE STRONG delivered the opinion of the court.

title: Ketchum v. Duncan Hays


text: Talk:Ketchum v. Duncan Hays

title: Talk:Ketchum v. Duncan Hays


text:
Ketchum v. Duncan Hays/Opinion of the Court

The principal question attempted to be raised by the appellants is, whether the deed of trust or mortgage of the railroad company, executed in 1853, is a valid security, not merely for the bonds therein described, but for the interest-coupons that fell due in May and November, 1874, and which are now held by Alexander Duncan. Assuming that the question is properly before us, we proceed directly to consider it. On the part of the appellants, it is claimed that the coupons were paid when they became due, or, secondly, if not, that Duncan, Sherman, & Co., and their assignee, Alexander Duncan, are estopped by fraud and breach of trust from setting them up as first mortgage liens, that is, as entitled to the benefit of the lien of the mortgage of 1853; and, thirdly, that the coupons, if not paid when they fell due, have since been paid to Duncan, Sherman, & Co., under a special appropriation of the net earnings of the railroad, which the firm diverted to other uses. This, it is said, appears from a proper marshalling of the assets of the railroad company.

On the other hand, Alexander Duncan, who obtained those coupons from Duncan, Sherman, & Co., denies that they were paid when they fell due, or have ever been paid. He denies that there is any estoppel, arising from fraud or breach of trust, against claiming the coupons to be entitled to the lien of the first mortgage. And he denies that there has been any misappropriation of the net earnings of the railroad company, which, under any proper marshalling of the assets, shows that the coupons were paid to the firm from which he obtained them. He insists that the coupons, instead of having been paid, became the property of Duncan, Sherman, & Co., either by purchase or transfer from the former owners, at or about the times when they fell due, and that he has succeeded to the rights of those purchasers. It is to the support of one or the other of these opposite averments of the parties that most of the evidence in this voluminous record has been directed.

If the coupons have not been paid in fact, or equitably by funds which Duncan, Sherman, & Co. should have appropriated to paying them, and if there be no estoppel against asserting them, it is not claimed that they are not protected by the mortgage as fully as the bonds from which they were taken.

What, then, is the evidence of actual payment? The coupons were produced uncancelled, and they were proved before the master appoi ted by the Circuit Court. If there were nothing else in the case, Alexander Duncan's possession of them would raise the presumption that he became the holder in the usual course of business, for value, at their date, and before they became payable. The appellees claim the benefit of this presumption; but it is completely rebutted by proof that neither Duncan, Sherman, & Co., nor Alexander Duncan, acquired any ownership of them before they fell due. We are then confined to a consideration of what occurred at that time and thereafter. There are some things so clearly established by the evidence that they must be considered beyond doubt. They are these:--

1. Neither the coupons due in May, 1874, nor those due in November, 1874, were paid by the railroad company.

2. They were not paid with money or funds furnished by the railroad company.

3. They were not paid by any one in pursuance of an agreement with the railroad company to pay them for or on behalf of the debtors, or in extinguishment of the debt.

Thus far the evidence is full and uncontradicted.

4. Duncan, Sherman, & Co., who furnished the money which the former owners received for the coupons, did not intend to pay them in any such sense as to relieve the railroad company from its obligation. By advancing the money, and directing its payment to the holders of the coupons, they intended to take the place of those holders, and to become the owners of the evidences of the company's debt; or, in other words, they intended to obtain for themselves the rights of purchasers. They did not advance the money either to or for the company. Certainly, they did not intend to extinguish the coupons. Of this the evidence is very full. The firm had made advances to the company to pay the coupons due in November, 1873, as well as interest due in January and March, 1874, amounting to a very large sum. These advances had not been repaid when the May coupons fell due. Those coupons the company was then utterly unable to take up. In near prospect of this inability, William B. Duncan, the head of the firm, on the 28th of April, 1874, telegraphed from New York to the company at Mobile that his firm would purchase for their own account sterling coupons, payable in London. The firm also telegraphed to the Bank of Mobile and to the Union Bank of London to purchase the coupons there presented for them, charging their account with the cost, and transmitting the coupons uncancelled. The railroad company acceded to the proposition made them, and the Bank of Mobile and the Union Bank did also. Similar arrangements were made respecting the November coupons, except that Duncan, Sherman, & Co. arranged with the Cr edit Foncier to make the purchase in London. Both these banks were agents of the firm in the transactions. They were not agents of the railroad company. They had no funds of the company in hand. In taking up the coupons, they acted for Duncan, Sherman, & Co., charged the cost to their account, transmitted to them the coupons taken up without cancellation, and were repaid by them. In view of these facts, if is manifest that, whatever may have been the nature of the transaction by which the coupons passed from the hands of the former holders into the possession of Duncan, Sherman, & Co., it was not intended by the firm to be a payment or extinguishment of the company's liability. Neither they, nor the company, nor the Bank of Mobile, nor the Union Bank, nor the Cr edit Foncier, so intended or understood it. Was it, then, a payment? It is as difficult to see how there can be a payment and extinguishment thereby of a debt without any intention to pay it as it is to see how there can be a sale without an intention to sell.

But that the coupons were either paid, or transferred to Duncan, Sherman, & Co. unpaid, is plain enough. The transaction, whatever it was, must have been a payment, or a transfer by gift or purchase. Was it, then, a purchase? It is undoubtedly true that it is essential to a sale that both parties should consent to it. We may admi, also, that 'where, as in this case, a sale, compared with payment, is prejudicial to the holder's interest, by continuing the burden of the coupons upon the common security, and lessening its value in reference to the principal debt, the intent to sell should be clearly proved.' But the intent to sell, or the assent of the former owner to a sale, need not have been expressly given. It may be inferred from the circumstances of the transaction. It often is. In the present case, the nature of the subject cannot be overlooked. Interest-coupons are instuments of a peculiar character. The title to them passes from hand to hand by mere delivery. A transfer of possession is presumptively a transfer of title. And especially is this true when the transfer is made to one who is not a debtor, to one who is under no obligation to receive them or to pay them. A holder is not warranted to believe that such a person intended to extinguish the coupons when he hands over the sum called for by them and takes them into his possession. It is not in accordance with common experience for one man to pay the debt of another, without receiving any benefit from his act. We cannot close our eyes to things that are of daily occurrence. It is within common knowledge that interest-coupons, alike those that are not due and those that are due, are passed from hand to hand; the received paying the amoung they call for, without any intention on his part to extinguish them, and without any belief in the other party that they are extinguished by the transaction. In such a case, the holder intends to transfer his title, not to extinguish the debt. In multitudes of cases, coupons are transferred by persons who are not the owners of the bonds from which they have been detached. To hold that in all these cases the coupons are paid and extinguished, and not transferred or assigned, unless there was something more to show an assent of the person parting with the possession that they should remain alive, and be available in the hands of the person to whom they were delivered, would, we think, be inconsistent with the common understanding of business men.

In the present case, there was much in the circumstances attending the transfer of the possession of the coupons from the original holders to Duncan, Sherman, & Co., or their agents, tending to show that those holders could not have believed the payment made to them extinguished the securities, so that they could not thereafter be set up by the transferees against the railroad company. Those circumstances, certainly, should have awakened their attention and led them to inquity. The coupons were not paid in the usual manner, or at the usual place, or by the persons accustomed to pay them. Before May, 1874, the coupons paid at Mobile had always been paid at the office of the company by its officers, and had been left there. They had been paid, it is true, by checks drawn on the Bank of Mobile; but the holders had received those checks only on the delivery of the coupons to the company. In regard to the May and November coupons of 1874, this usage was changed. The coupons were not left at the company's office. They were taken there for verification, and then returned to the holders, with directions to take them to the bank, where they would be paid; but no checks drawn upon the bank were given to the holders. Some of them knew the company was not paying those coupons. Others inquired, and were told the bank would purchase. Others did not know the company would not pay, and they made no inquity. At the bank, the holders received the amounts due on the coupons, and left them in the possession of the bank: but, as they brought no checks, they must have known that the bank had no vouchers for its payments, unless the coupons continued in force in the hands of the new posses sors; and hence it is a fair presumption, that, when they delivered the possession, they assented to a transfer of ownership. They must have expected that the bank would hold the coupons as claims against the railr ad company; and with that expectation they transferred them to the bank. What was that but tacit consent to a sale?

Similar remarks might be made respecting the coupons presented in London. On the 28th of April, 1874, Duncan, Sherman, & Co. sent a telegram to the Union Bank, requesting it to pay the May coupons for their account and forward them uncancelled. These instructions the bank followed. Parties who presented the coupons there received the amount, and handed over the security, so far as it appears without a word. Here, too, it is a reasonable presumption, that both parties supposed and expected that the coupons remaining uncancelled would be preserved, and held as claims against the railroad company.

The coupon-holders who presented their coupons in New York were informed that Duncan, Sherman, & Co. were purchasing them.

The manner in which the November coupons passed from the holders was not essentially different. There were, however, notices that the Bank of Mobile was purchasing them posted in the bank, and in the office of the railroad company. In London, they were taken by the Cr edit Foncier, with which Duncan, Sherman, & Co. had arranged to purchase them; and notice of an intention to purchase was publicly given by the London house.

If, now, in addition to this, it be considered that none of the original holders of these coupons, with perhaps one exception (and he not an appellant), have hitherto denied the sale and purchase, and that not one has reclaimed the coupons and thus disaffirmed any sale, it seems to us a just conclusion, that they must be held to have assented to the purchase which was certainly intended by those who gave them the money and thereby acquired the possession.

It is argued, however, by the appellant, that Duncan, Sherman, & Co., and, consequently, Alexander Duncan, their assignee, are estopped from claiming that the May and November coupons are unpaid. Precisely wherein this alleged estoppel consists, we are unable to discover. It is said, that setting up the coupons now as an existing claim entitled to the protection of the mortgage of the railroad company, is a fraud upon the bondholders secured by it. This we cannot see. If the original holders of the May and November coupons had sold them to some one else than Duncan, Sherman, & Co., it could not be doubted those vendees would have an unimpeachable right, equal at least to the right of the bondholders. Such a sale would have worked no injury to the bondholders of which they could complain. They are in no worse condition now than they would have been in the case supposed. If there be any difference between that case and the present, it must be found in the relation William B. Duncan, and the firm of which he was a member, held to the railroad company and to its creditors. The firm had been financial agents of the company, and Duncan had been a director several years. In April, 1874, he was elected its president. It was his duty, therefore, to have regard for the interests of the company, its stockholders, and, measurably, of its creditors. He was bound to entire good faith. This may be conceded. But was it unfaithfulness to the company, or to the bondholders of the company, to purchase either the bonds or the coupons falling due, which the company was unable to pay as they fell due? Was it unfaithfulness thus to save the company from going into immediate bankruptcy? This cannot be maintained. Subsequent events may show that it would have been better for the bondholders had the May and November coupons been suffered to go to protest, or had the company acknowledged publicly its inability to pay them when they fell due, though it is not proved that it would have been better. But the duty of Duncan was to do what in his judgment at the time was the best thing for all persons for whom he was a trustee. It surely was not his duty to permit the coupons to go into default. Still less, as it appears to us, was it a breach of trust in him to purchase the coupons and hold them in order that the company might have time to provide for their payment. The company was informed of his intention to make the purchase, and its consent was given. It can, therefore, make no claim that Duncan, Sherman, & Co. are estopped from asserting that they acquired possession of the coupons by purchase; and the company makes no such assertion. The bondholders, under the first mortgage, or rather a very small number of them, however, do. They say, had the coupons not been purchased, had the company been known to have defaulted upon them, the trustees in the mortgage might have taken possession of the railroad, for the benefit of the bondholders. Hence they say they were injured by the purchase, if there was one. But, as we have said, they would have been equally injured if the purchase had been made by a stranger. There would have been no estoppel against a stranger. And William B. Duncan can be in no worse position, unless it be shown that he was guilty of bad faith in making the purchase through his firm.

Moreover, it is necessary to notice who sets up this plea of estoppel. An estoppel in pais does not operate in favor of everybody. It operates only in favor of a person who has been misled to his injury, and he only can set it up. If, therefore, there be any estoppel in this case, it must be in favor of some bondholder (if any there was) who was led to believe, by the action of William B. Duncan, that the railroad company was, in May and November, 1874, paying the coupons of the first mortgage, then falling due, and paying them in order to extinguishment; but no such bondholder asserts such an estoppel. So far as it appears, no one of the appellants was so misled. No one of them can claim an estoppel which is personal, and of which only the person misled to his hurt can avail himself. Indeed, it does not appear that any one of the witnesses (very few in number) who supposed the coupons were being paid when they received their money from the Bank of Mobile, was at the time, or is now, the holder of a single first-mortgage bond. Nor is there a single coupon-holder who now claims that he was misled or deceived by any of Duncan, Sherman, & Co.'s agents, by the Bank of Mobile, or the Union Bank of London, or by the Cr edit Foncier. It is impossible, therefore, to see how there can be any estoppel, or wherein can be found any fraud in purchasing the coupons.

The appellants have expended much argument to show that Duncan, Sherman, & Co., and Alexander Duncan, their assignee, are not entitled by subrogation to any rights of the persons who transferred to them the possession of the coupons. This may be admitted; but the argument is inapplicable to the case. Subrogation is an equitable right. The right claimed here is a legal one, obtained by transfer of the coupons, as distinguished from payment. Numerous anthorities have been adduced to maintain that there is no right of subrogation. They are all wide of the mark. The case of The Union Trust Company of New York v. The Monticello & Port Jarvis Railroad Co. (63 N. Y. 311) is the one principally relied upon. There it appeared that one Smith had made an agreement with a railroad company to advance the money to pay coupons on the company's bonds when they should become due, holding the coupons for security. In pursuance of this agreement, he went to the plaintiff, where the coupons were payable, and left with it the money to pay the coupons when presented; it agreeing with him to take and deliver them to him uncancelled, that he might hold them as security for the money advanced. It was held that Smith was not entitled to share ratably in the proceeds of the mortgage to secure the bonds and coupons with other bond and coupon holders; but in that case the money was substantially advanced to the company, and the coupons were paid by it through its agent at the place where they were payable. The coupons were paid with money advanced to the company, and under an agreement to make such an advance to pay. These coupon-holders had a right to conclude that the money as paid by their debtors. We gather the facts from the opinion of the court. The case, therefore, bears very slight resemblance to the present. It was not a case of subrogation; nor was it a case of purchase or transfer: it was a case of agency for the debtor.

It is next contended by the appellants that, even it Duncan, Sherman, & Co. did become the owners of the coupons, by purchase or transfer, the firm received from the railroad company sums of money sufficient to pay what had been paid for the coupons, and which it ought to have applied to their extinction. This raises a question of appropriation. The facts exhibited by the evidence are these: When, in April, 1874, William B. Duncan became the president of the railroad company, his firm was a large creditor of the company for money lent, and for advances made to pay the interest of the first-mortgage bonds due in 1873. And there was then a large floating debt, amounting, at the beginning of 1874, to about $1,500,000. Of this floating debt, nearly $200,000 were due to his firm, more than three-quarters of which consisted of a temporary loan made to the company, to enable it to pay its interest and meet its current liabilities. At the same time, the May interest on the first-mortgage bonds was about coming due, and the company had no means to meet it. In these circumstances, the board of directors of the company, on the 28th of April, 1874, in the absence of Duncan, passed the following resolution:--

'Resolved, that the net earnings of the company, after payment of the current expenses, be pledged for repayment of advances obtained by the president, for the purpose of meeting the May interest; and that the floating debt, in the shape of bills payable, be extended, so far as practicable, to next winter; and that credits so extending shall be secured by pledge of consolidated bonds in the hands of Bank of Mobile, or at such other bank or place as may be determined by the vice-president, in trust, at the rates of seventy-five cents.'

This, it is contended by the appellants, was a specific appropriation of the net earnings of the road to the payment of the May interest, which the president was bound thus to appropriate, in preference to paying the floating debt, or any thing except current expenses. Whether it was or not, we will presently consider.

The net earnings of the road during the year 1874 (assuming that they all went into the hands of Duncan, Sherman, & Co.), together with the proceeds of sales of company-bonds, amounted to about $800,000. The annual interest of the company's bonds was considerably more than that sum. But it was necessary to keep the floating debt afloat; and that could be done only by partial payments and renewals, and by pledging collaterals. Had that debt not been kept afloat, the company must at once have suspended operations and ceased making earnings. Accordingly it was reduced and extended. It was reduced over $280,000 during the year; and included in the reduction was a payment of $150,000 to Duncan, Sherman, & Co., to reimburse their temporary loan, and some $24,000 more on their general account; leaving still some $17,000 due to them beyond what was due on the May and November coupons they had purchased. The remainder of the net earnings was used to pay overdue coupons of the previous year, interest on the floating debt, interest on the company's convertible and other bonds, claims in judgment, and other pressing liabilities. All the resources of the company were thus disposed of.

It is obvious, therefore, that in the latter part of April, 1874, unless the company could be relieved from immediate demand for payment of the May coupons, it would be in the power of its mortgage creditors to take possession of the road and force a foreclosure. And unless the floating debt could be taken care of, for which reliance must be placed mainly on the future net earnings, equal disaster might be expected from that direction. It was when the company was in this condition the resolution of April 28, 1 74, was passed. It contemplated the possibility of obtaining advances to the company in order to meet the imminent claims for payment of the coupons, and it offered a pledge of net earnings as a security for such advances or loans to the company. But no such advances or loans were made by anybody. They had been made the year before; but none were made or agreed to be made to enable the company to pay the May interest. There never came into existence, therefore, any debt for which the earnings were pledged by the resolution. And, even if the purchase of the coupons by Duncan, Sherman, & Co. could be considered advances to the company to enable it to pay the coupons, the pledge made by the directors' resolution was not a pledge to the coupon-holders. It was a pledge for the benefit of the firm, which it was competent for the firm to forego without losing its claim as transferees of the coupons upon the railroad company.

There was, then, no misappropriation of the company's funds by William B. Duncan,-no payment by him of which either the company or the bondholders have any reason to complain. And there is no foundation for the claim now made, that the payments out of the net earnings, applied to the payment of coupons of former years, to the reduction of the floating debt, and to the satisfaction of interest upon it, should have been made in discharge of the May and November coupons.

The exact net earnings of the year 1874, as it appears from the report of the directors for that year, was $707,865.04. These were disposed of as follows:--

1. Paid interest-coupons matured in 1872 and 1873 $139,296.

2. Interest-coupons matured in 1874, none of them those of May and November 197,970.

3. Interest paid to secure renewal of floating debt and to prevent proceedings against the company on the part of the holders 118,346.

4. Paid on account of floating debt to prevent sacrifice of securities belonging to the company 281,948.

In view of this, it cannot be maintained, either that the coupons of May and November, transferred to Duncan, Sherman, & Co., were paid, or that, in obedience to any rule of law or equity, the net earnings of the road should have been applied in payment of them. They are, therefore, existing liabilities of the railroad company, and protected by the first mortgage.

But we think they have no equity superior to that of the bonds from which they were taken, or the subsequently maturing coupons. The mortgage was given as a security for the principal of the bonds as well as the interest, with no priority to either. The coupons are mere representatives of the claim for interest. The obligation of the debtor evidenced by them cannot be higher, nor entitled to greater privileges, than it would be had the bonds, in their body, undertaken the payment of interest. Cutting them from the several bonds of which they were a part, and transferring them to other holders, can give them no increased equities, so far as we can perceive. Had they been assigned with a guaranty of payment, it may well be they would be entitled to payment before the assignors could claim the fund. Then they might have an equity to prior payment growing out of the guaranty. But there was no such undertaking of the assignors in this case. A mere transfer or assignment does not import a guaranty. At most, it warrants title, not solvency of the debtor, or collectibility of the chose assigned. A transfer or assignment of a claim, or part of a claim, secured by a mortgage given to protect that claim, in common with other claims contemporaneously originating, would seem to refer the transferee to the common security, and measure his rights and equities by that. It is in vain to urge that as between the person transferring and the transferee there is an equity, or even moral obligation, if it was the intention of the parties to participate, 'pari passu,' in the proceeds of the property pledged as a security. And such an intention may well be inferred from an assignment or t ansfer without guaranty. The meaning of such a transfer without more is that the transferee takes precisely the rights of the person from whom he obtains his title, and no more. But certainly such a transfer cannot have the effect of giving to the transferee greater rights than those created by the mortgage. Dunham v. ''The Cincinnati, Peru, &c. Railway Co.'', 1 Wall. 254; Gordillo v. Wiquetin, L. R. 5 Ch. 287.

The mortgage in this case secures no priority to the coupons past due, nor to those first due. It places all bondholders and coupon-holders on the same level. It requires the trustees, in case of a sale, to apply the residue of the proceeds, after deducting costs, charges, &c., 'to pay the principal and interest which may be due on the bonds issued,' as recited, rendering the balance, if any, to the company, plainly meaning that the bonds and interest due (that is, owing or contracted to be paid) are to share in the application. By the terms of the mortgage the holders of the coupons of May and November, 1874, are therefore to have no preference over the bondholders and other coupon-holders.

We concur, therefore, in the decree of the Circuit Court, so far as it determined the priorities of the parties.

It remains only to consider the terms of the sale ordered. That a sale was properly directed, rather than a strict foreclosure, is quite evident. It was the object of all the consolidated bills to procure a sale; and, if there was not assent by all parties, there was at least no objection to it. A strict fore closure would not have converted the property into money. It would, in fact, have required the creditors to advance more funds to pay the costs and expenses. This no bondholder could justly require from his associates. Besides, a strict foreclosure would not be a winding up of the matter. It would leave an undivided beneficial interest in an unmanageable property in the hands of a large number of persons, who are very likely to disagree in regard to its use. The same observations might be made respecting a purchase by a trustee for the benefit of all the lien creditors. Such a purchase would convert them all into tenants in common, and probably give rise to endless discussion. Assuming that it was competent for the court, on bills praying for a sale and payment thereby of debts due, to compel creditors to take, in lieu of their personal rights, undivided interests in realty, which may be doubted, what could the trustee do after he had become the purchaser? Could he operate the railroad, at his discretion, through four States and in as many jurisdictions? Or would the court have placed the property again in the hands of a receiver? If so, what progress would have been made in securing payment of the creditors' bonds? What advance from the position in which the creditors now are, since the road is now in the hands of a receiver? It it too plain for any further comment that neither a strict foreclosure, nor a purchase by a trustee to buy, would have been for the interest of any bondholder.

The main objection to the terms prescribed by the Circuit Court for conducting the sale ordered, appears to be that they give superior advantages to some of the bond and coupon holders. The masters appointed to make the sale were, by the decree, required to exact from any bidder, before making an adjudication to him, a deposit of $50,000 in money, to pay costs and expenses, and a further deposit of $100,000 in money, or of the bonds or coupons described in the deed of trust and master's report, as a part of the debt secured by the deed. The decree further ordered that the masters might receive, in payment from the highest and last bidder, bonds and coupons which form a part of the first-mortgage debt ascertained to be due or owing by the master in his report, and sustained by the opinion of the court; 'provided, however, that a sum sufficient to pay the costs, charges, and expenses of the trust a above mentioned, whether exceeding the said cash deposit or not, and also to p ovide for the payment of the pro-rata dividend which shall be due or owing to the owners of other bonds and coupons secured under the deed of trust, must be paid in money; and provided also, that if the said mortgage property shall be bid off, directly or indirectly, by, for, or in behalf of the bondholders and creditors who have or shall have entered into and subscribed the agreement for the readjustment of the securities of said company, dated Oct. 1, 1876, commonly called the agreement of reorganization, then and in that case all and every bondholder and creditor of said company not having already entered into and subscribed said agreement, who shall, on or before the first day of September next, enter into and subscribe the same, and deposit their securities with the Farmers' Loan and Trust Company, in the city of New York, or with the Bank of Mobile, in the city of Mobile, as provided by said agreement, shall be, and they are hereby, allowed to participate in said bid and purchase, on the same terms, on an equal footing in all respects, according to the character of their claims respectively, with the said bondholders and creditors who have heretofore entered into and signed said agreement.'

It is said this enables those who have subscribed to that agreement, and who are a large majority of the bondholders, to purchase on paying a much less sum in money than would be required of other bondholders who have not signed the agreement. This is true; but we do not perceive that it is inequitable. After all, it makes no distinction against the minority which they have not themselves made by failing to secure a majority of the bonds. They are as much entitled to use their bonds in payment as any other bondholders are. It is their misfortune if they have not as many bonds as others have. They have no equity to cast their misfortune upon those who own more bonds than they do. Permission to bondholders who are mortgagees to purchase at a sale of the mortgaged property and to pay by their bonds is not only usual, but it is highly advantageous to all persons who have an interest. It tends to enhance the price which may be obtained, and thus benefits other creditors as well as the mortgaggor. That large bondholders have an advantage over small ones, in that they are required to pay less in money, may be true; but it is an advantage they purchased when they obtained their bonds, of which it would be inequitable to deprive them. Such an advantage is everywhere recognized and protected,-notably in partition suits, and in sales of the assets of a partnership, as well as in many sheriffs' sales. Had there been but two creditors of the railroad company, one holding $10,000,000 of the company's mortgage bonds, and the other $100,000,-it would be strange indeed if the former, buying at a foreclosure sale, might not pay with his bonds that proportion of his bid which would come to him; paying the rest in money, because the latter would be obliged to pay more in money if he had become the purchaser. The minority holder has no such equity to control the sale. The case supposed is in principle the one we have before us; for it is not to be doubted that creditors of a common debtor may combine to purchase the debtor's property at a judicial sale, though they may not combine to prevent others from purchasing. The decree now complained of puts no obstacle in the way of a purchase by the appellants; nor does the agreement of Oct. 1, 1876.

It follows from what we have said that neither of the appeals can be sustained.

It is ordered that the appellants in the first case pay all costs of their appeal, except the costs of the certiorari and return; including the printing thereof and the clerk's fees for copying, which the appellees are ordered to pay.

It is further ordered that Henry Jump, one of the appellants, shall not be charged with any costs that may have accrued since April 1, 1878, when he moved to withdraw his appeal.

And it is further ordered that the costs of the appeal in the second case be paid by the appellants.

Decree affirmed.

MR. JUSTICE CLIFFORD, with whom concurred MR. JUSTICE SWAYNE, MR. JUSTICE MILLER, and MR. JUSTICE HARLAN, dissenting.


text: Talk:Ketchum v. Duncan Hays/Opinion of the Court


text:
Ketchum v. Duncan Hays/Dissent Clifford

MR. JUSTICE CLIFFORD, with whom concurred MR. JUSTICE SWAYNE, MR. JUSTICE MILLER, and MR. JUSTICE HARLAN, dissenting.

I am of opinion that the coupons which are by this decree held to be a lien on the road were extinguished by payment; that the holders of them, who presented them for payment at the several places to which they were directed, had no thought of selling them, and, in fact, did not sell them, and, therefore, in law they were paid, and not sold.

I also believe that the attempt of Duncan, Sherman, & Co. to take up these coupons without paying them was deceptive and collusive, and was dictated by their interest in concealing from the public the fact that the railroad company was unable to meet those payments.

title: Ketchum v. Duncan Hays/Dissent Clifford


text: Talk:Ketchum v. Duncan Hays/Dissent Clifford


text:
County of Ray v. Vansycle

ERROR to the Circuit Court of the United States for the Western District of Missouri.

This was an action by Vansycle to recover the amount due on interest coupons attached to bonds which were issued in 1869 in the name of the County of Ray, Missouri, by each of which it acknowledged itself indebted to the St. Louis and St. Joseph Railroad Company in the sum of $1,000; which it promised to pay to that company or bearer, at the American Exchange National Bank in New York, on the first day of January, 1879, with eight per cent interest, payable annually, upon the presentation and delivery of the coupons.

Each bond contained these recitals:--

'This bond being issued under and pursuant to an order of the county court of Ray County, made under the authority of the Constitution of the State of Missouri and the laws of the General Assembly of the State of Missouri, and authorized by a vote of the people of said county, at a special election held for that purpose.

'In testimony whereof the said county of Ray has executed this bond, by the presiding justice of the county court of said county, under the order of said court, signing his name thereto; and by the clerk of said court, under order thereof, attesting the same, and affixing thereto the seal of said court. This done at the town of Richmond, county of Ray, aforesaid, this second day of _____, 1869.

[L. S.] 'C. W. LARRAMORE,

'Presiding Justice of the County Court of Ray County, Missouri.

'Attest: GEO. N. MCGEE,

'Clerk of the County Court of Ray County, Missouri.'

The coupons were in the form following:--

'RICHARD, RAY COUNTY, MISSOURI, A.D. 1869.

'The county of Ray acknowledges to owe the sum of eighty dollars, payable to bearer on the first day of January, A.D. 1874, at the American Exchange National Bank in New York, for one year's interest on bond No. ___.

'GEO. N. MCGEE,

Clerk of County Court of Ray County, Mo.

Vansycle was a lawful holder for value of the bonds, and received them without actual notice or knowledge of any defects or irregularities in their issue.

The main facts connected with the issue of the bonds cover a period of more than ten years, commencing with the year 1859.

An act of the General Assembly of the State of Missouri, approved Dec. 5, 1859, and amended Jan. 5, 1860, incorporated the Missouri River Valley Railroad Company, with power to construct a railroad from any point on the North Missouri Railroad in Randolph County, by way of Brunswick, in Chariton County; thence, through Carroll, Ray, Platte, and Clay Counties, to Weston, in Platte County; and authorized the county court of any county in which any part of such railroad might be, to subscribe to the stock of the company, invest its funds in such stock, and raise the funds by tax to be voted by the legal voters of the county, in such manner as the county court might prescribe for the purpose of paying such stock. It declared that the provisions of the general railroad law of Missouri, not inconsistent therewith, should be extended to that company.

The general railroad law of Missouri then in force made it lawful for the county court of any county to subscribe to the capital stock of any railroad company duly organized in Missouri, and, for information, to cause an election to be held to ascertain the sense of the tax-payers of such county as to such subscription, and as to whether the same should be paid by issuing county bonds or by taxation. A county, upon its making such subscription, became, like other subscribers to stock, entitled to the privileges granted, and subject to the liabilities imposed, by that law, or by the charter of the company to which such subscription was made. In order to raise funds to pay the instalments which might be called for from time to time by the board of directors of such company, it was made the duty of the county court to issue the bonds of the county, or levy a special tax upon all property taxable by law for State and county purposes, &c.

By an act approved March 30, 1860, amendatory to that of Dec. 5, 1859, and for other purposes, the county courts of Ray and other counties specifically named were authorized to issue and deliver the bonds of their respective counties in payment of any subscription to or purchase of the capital stock of the Missouri River Valley Railroad Company which such counties might respectively make; the bonds to be in the sum of not exceeding $1,000 each bond, having not exceeding ten years to run before maturity, bearing interest at the rate of eight per cent per annum, payable annually at the county seat of the county issuing them, or in the city of St. Louis, as the county court might prefer.

On the 2d of July, 1860, the Ray county court, by an order entered upon its records, directed a vote of the people to be taken on the 13th of August, 1860, on the question whether the county should take $200,000 of stock in the Missouri River Valley Railroad Company, upon the following conditions: That all of said county stock shall be expended on that part of the railroad in that county; that said subscription shall be payable in county bonds, to run ten years, bearing interest, to be paid annually, at the rate of eight per cent; and that no bond shall be issued or delivered to said company until provision shall be made for building the railroad to the eastern boundary of the county.

At an election held, as ordered, one thousand three hundred and thirty-seven votes were cast in favor of the subscription, and six hundred and twenty-three votes against it. The records of the county court state that the vote cast for the subscription was by 'a majority of the people and tax-payers of the county of Ray.' The court appointed agents to subscribe and vote the stock upon the conditions mentioned in the order. Such subscription was legally made.

An act of the General Assembly, approved Feb. 10, 1864, the provisions of which were accepted by the North Missouri Railroad Company, provided that the Chariton and Randolph Railroad Company and the Missouri River Valley Railroad Company might, by a vote of a majority of their stockholders in interest, transfer and assign to the North Missouri Railroad Company all of their effects, assets, rights, and privileges, under their charters, and all the work that had been done in the construction of their respective roads. The two companies, when the authorized transfer by them made should be accepted by the North Missouri Railroad Company, were to cease to have any corporate existence, and to be styled and known thereafter as the West Branch of the North Missouri Railroad. The act declared that said west branch should commence at the town of Moberly, in the county of Randolph, on the North Missouri Railroad, and extend west along the route adopted by the Chariton and Randolph Railroad Company, to the city of Brunswick; thence on or near the survey of the Missouri Valley Road to Richmond, in Ray County; and thence, by the most advantageous and practicable route, to some point on the north side of the Missouri River, at or below St. Joseph. The act also provided that all the franchises vested in the Chariton and Randolph Railr ad Company and the Missouri Valley Railroad should become, by such transfer and acceptance, fully and completely vested in the North Missouri Railroad Company.

The county court of Ray, at its April term, 1864, appointed agents to vote two thousand shares of stock in the then approaching election for directors of the Missouri River Valley Railroad Company, with instructions also to vote in favor of transferring and assigning to the North Missouri Railroad Company all the effects, assets, rights, and privileges of the Missouri River Valley Railroad Company, and all the work done upon the Missouri River Valley Railroad, as provided in the act of Feb. 10, 1864. The agents thus appointed reported to the court, at its July term, 1864, that in accordance with instructions they had cast the vote of the county. Their report was approved, and ordered to be filed and recorded.

On the 13th of December, 1866, a written agreement was made between the North Missouri Railroad Company and the county court; which provided, among other things, that the company, for the consideration of $150,000 to be paid in the bonds of Ray County, should build, run, and operate its west branch to the city of Richmond, in that county, by a spur of said west branch, and complete the connection within ninety days after the main or straight line of the west branch should be completed to a point opposite Richmond. It is not necessary to set out that agreement. It is sufficient to say that it secured to the county all the railroad facilities which it would have received had the main line of the west branch passed in the immediate vicinity of the city of Richmond; and, in consideration of its consenting to accept the building, operating, and running of said west branch, as thereby provided, and releasing the North Missouri Railroad from its former obligations, the latter agreed to release the county from the sum of $50,000 of the stock theretofore subscribed for the construction of the said west branch of the North Missouri Railroad. The company agreed to build and construct the spur branch or connection from the main line 'to the said city of Richmond aforesaid, so far as the grading is concerned, when said county of Ray issues its bonds for the said sum of $150,000 to said North Missouri Railroad Company, so that it may be ready for the iron by the time the said west branch of said North Missouri reaches a point opposite the said city of Richmond.' This agreement was promptly ratified of record, and signed by the justices of said court, with the seal of the county affixed. An order was at the same time made upon the records of the court, directing that bonds of the county amounting to $150,000 be issued 'according to the orders of the county court of said county of Ray heretofore made and the stipulations of this contract.'

At the same term of the court an agent was appointed to vote the county stock at the next election of directors for the North Missouri Railroad Company.

In January, 1868, the St. Louis and St. Joseph Railroad Company was organized, under the general railroad law of Missouri, for the purpose of constructing and operating a railroad through Ray, Clinton, and Buchanan Counties, from a point on the west branch of the North Missouri Railroad, at Richmond, by the most practicable route, through Plattsburg, to the city of St. Joseph.

On the 15th of April, 1868, the North Missouri Railroad Company authorized its president and executive committee to make such contracts with the St. Louis and St. Joseph Railroad Company, to aid in building the latter road, as might be consistent with the interest of the former company; and also 'to release the county of Ray from its subscription of $200,000 to aid in building the west branch of the North Missouri Railroad, upon the condition that this (the North Missouri) company is released from constructing a spur from the west branch to Richmond; and also upon the further condition, that Ray County will subscribe $250,000 stock, and secure the same, to be paid toward the building of the St. Louis and St. Joseph Railroad.'

This proposition was submitted to the county court and rejected. That court, however, on the 19th of May, 1868, entered of record an order from which the following is an extract: 'In order that said $200,000 may be applied to the purpose and object of constructing a railroad from the west branch of the North Missouri Railroad, through the city of Richmond, in said county of Ray, to St. Joseph, it is, therefore, ordered by the court that the said sum of $200,000 be, and the same is hereby, transferred to the St. Louis and St. Joseph Railroad Company, to be applied in building, constructing, and operating that portion of the St. Louis and St. Joseph Railroad in Ray County, north of the west branch of said North Missouri Railroad, upon the following express conditions,' &c. These conditions provided that the county should be released in writing from its subscription of $200,000 to the North Missouri Railroad Company; that, upon the filing of such release in the proper office, the presiding justice should subscribe the sum of $200,000 as stock in the St. Louis and St. Joseph Railroad Company; that bonds for that amount should be issued to the company, $50,000, when the court was satisfied that five miles of the road in Ray County, north of the west branch of the North Missouri Railroad, and beginning at the said branch, was under contract, and for the building of which the bonds and their proceeds were to be applied; and $50,000 as each additional five miles of the road was graded and ready for the ties, and not then unless the court should be satisfied that all the bonds previously issued had been properly applied.

In accordance with this order, the North Missouri Railroad Company, by its president, executed in June, 1868, and filed for record, its written release to Ray County of the latter's subscription to it of $200,000; 'the consideration of this release being the entire cancellation of the existing contracts between the county of Ray and the North Missouri Railroad Company, and also the subscription by the county of Ray to the capital stock of the St. Louis and St. Joseph Railroad Company.'No election was held at which the citizens of the county voted in favor of a subscription to the capital stock of the St. Louis and St. Joseph Railroad Company; but, before the court made the order of May 19, 1868, it received the petition of from twelve hundred to fourteen hundred citizens of the county, asking it to transfer its subscription to the St. Louis and St. Joseph Railroad Company.

At the November term, 1868, of the court, an order was made and complied with, directing that $50,000 of the county bonds be issued to the St. Louis and St. Joseph Railroad Company; $50,000 more of them were directed by the court, at its September term, 1869, to be issued; and $50,000 additional, at its November term, 1869. The last $50,000 of the bonds were issued in pursuance of an order entered at its February term, 1870. None of them were delivered until after satisfactory proof had been made of the construction of each five miles of road, as stipulated in the agreement of the parties. The county received and still retains the requisite certificates of stock in payment for which the bonds were issued.

Sect. 14, art. 11, of the Constitution of Missouri ordains that 'the General Assembly shall not authorize any county, city, or town to become a stockholder in, or to loan its credit to, any company, association, or corporation, unless two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent thereto.'

In pursuance of that constitutional provision, the General Assembly, by general statute, declared, that 'it shall be lawful for the county court of any county, the city council of any city, or the trustees of any incorporated town, to take stock for such county, city, or town in, or loan the credit thereof to, any railroad company duly organized under this or any other law of the State; provided, that two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent to such subscription.'

The court below made a special finding, embracing the facts above set forth, and others stated in the opinion of this court, and rendered judgment in favor of the plaintiff. The county thereupon brought the case here by writ of error.

The case was submitted, on behalf of the plaintiff in error, by Mr. Francis M. Cockrell, on the brief of Mr. William S. Everett, who contended that

1. The county court had but a specially delegated authority, and could not subscribe for corporate stock, so as to bind the county, except with the assent of two-thirds of the qualified voters thereof, expressed in the mode prescribed. As no election was held or ordered, at which such voters, or any of them, had an opportunity of declaring their assent to the county subscription made in the year 1868, for stock in the St. Louis and St. Joseph Railroad Company, that subscription, and the orders for the issue of bonds in payment of it, were in manifest violation of the Constitution and the statutes of Missouri, the provisions whereof the plaintiff below was bound to take notice.

2. The county, in resisting a recovery upon the coupons, is not estopped from showing that the county court, by reason of the absence of a popular vote, had no jurisdiction in the premises; and that its orders were void, as unauthorized and prohibited acts.

3. The coupons are void in the hands of the plaintiff below, although the had no actual notice of the lacts which establish their nullity. The records of the county court, in the matter of the subscription in question, furnish conclusive proof that the condition precedent to the lawful issue of the bonds had not been performed.

Mr. John B. Henderson, contra.

MR. JUSTICE HARLAN, after stating the facts, delivered the opinion of the court.

title: County of Ray v. Vansycle


text: Talk:County of Ray v. Vansycle

title: Talk:County of Ray v. Vansycle


text:
County of Ray v. Vansycle/Opinion of the Court

The first inquiry suggested by the facts set forth in the special finding is as to the validity of the agreement of 1868, whereby the county of Ray secured exemption from liability to the North Missouri Railroad Company, on its original subscription of $200,000, and the St. Louis and St. Joseph Railroad Company obtained the bonds of the county for that amount. This question must be determined in the light of all that occurred in connection with the efforts made to secure a railroad through that county.

It appears that, at the election held in the year 1860, more than two-thirds of the votes cast in the county were in favor of a subscription of $200,000 to the capital stock of the Missouri River Valley Railroad Company, which proposed to construct a railroad through the county. The only condition which the voters imposed was, that the stock subscribed under the authority of that election 'should be expended on that part of the railroad in the county of Ray.' In obedience to the popular will, the subscription was made in that year. When, however, in 1864, that company transferred all its effects, assets, rights, and privileges to the North Missouri Railroad Company, the latter became entitled to the benefit of that subscription, and, in satisfaction thereof, to the bonds of the county, to the amount of $200,000. Of the validity of that transfer we have no doubt. It was authorized by an act of the General Assembly of Missouri, and made with the sanction of the stockholders of the companies interested, including the county. At the meeting of stockholders called to consider the question of transfer, the county was represented by an agent, designated by the county court, with specific instructions to vote the stock of the county in favor of such transfer. In appointing that agent, with such instructions, the court did not exceed its powers; since, by the terms of the act of Dec. 5, 1859, under the provisions of which the original subscription was made, the court was authorized 'to take proper steps to protect the interests' of the county, and also 'to appoint an agent to represent the county, to vote for it, and to receive its dividends.' It seems, therefore, entirely clear that the North Missouri Railroad Company acquired, prior to the adoption of the State constitution of 1865, a vested right to demand and receive the bonds of the county in payment of its original subscription. This right was not destroyed or impaired by that constitution. It has been decided by the Supreme Court of Missouri, that the section of the constitution of that State relating to municipal subscriptions was 'a limitation upon the future power of the legislature, and was not intended to retroact so as to have any controlling application to laws in existence when the constitution was adopted.' State, &c. v. Macon County Court, 41 Mo. 453; State, &c. v. Greene County, 54 id. 540; ''The State, ex rel. &c. v. The County Court of Sullivan County'', 51 id. 522; County of Callaway v. Foster, 93 U.S. 570; County of Scotland v. Thomas, 94 id. 688; County of Henry v. Nicolay, 95 id. 619.

But the North Missouri Railroad Company, for some unexplained reason, did not proceed in the construction of the contemplated road. Counsel do not, however, claim that its delay in that regard worked a forfeiture of its right to the bonds of Ray County, at the time of the organization, in the year 1868, of the St. Louis and St. Joseph Railroad Company. The latter had in view the construction of a road from some point on the west branch of the North Missouri Railroad, at Richmond, the county seat of Ray, to the city of St. Joseph,-in all material respects, the same road for the construction of which the county had previously contracted with the North Missouri Railroad Company. At this crisis, the latter company, having perhaps a pecuniary interest in establishing a connection between its west branch and the city of St. Joseph, proposed to release the county from its subscription of $200,000, if it would subscribe $250,000 to the capital stock of the St. Louis and St. Joseph Railroad Company. Declining to assent to that arrangement, the court, on behalf of the county, made a counter-proposition; to wit, that, for the purpose of constructing a railroad from the west branch of the North Missouri Railroad, through Richmond to St. Joseph, it would transfer the $200,000 subscription to the St. Louis and St. Joseph Railroad Company, by making a similar subscription to that company, to be applied in building, constructing, and operating such road, provided the county was released, in writing and of record, from all liability upon its original subscription to the North Missouri Railroad Company. This proposition was promptly acceded to by both companies. The required release was executed and put upon record; and the St. Louis and St. Joseph Railroad Company entered upon the construction of, and did construct, the proposed road; receiving the bonds of Ray County in sums of $50,000, as each five miles of road was completed, and faithfully applying the proceeds to that portion of the road which was in that county.

We are now asked to declare that the county is under no legal obligation to pay its bonds, issued and put upon the market under the circumstances we have detailed.

The fundamental proposition underlying the defence is, that, after the adoption of the Constitution of 1865, no subscription of stock could be lawfully made by the county until after an election; and that, no election having been held at which the people voted specifically in favor of a subscription to the stock of the St. Louis and St. Joseph Railroad Company, the action of the court was a nullity, creating no liability whatever upon the bonds issued in pursuance of the agreement of 1868. Whatever weight that proposition might have in some cases, it does not meet the precise issues here presented. It ignores altogether the direct connection which existed between the agreement of 1868 and the action taken by the county and its court prior to the yea 1865, whereby the county assumed the obligation to issue its bonds to the amount of $200,000, in discharge of a completed subscription to the stock of a corporation which came into existence and was fully organized before that constitution went into operation, and which could, notwithstanding the adoption of that instrument, compel the county to comply with its contract. It is the case of a transfer of such stock by exchange, in order that the county might obtain the desired road, and be discharged from legal obligations from which it could not justly or rightfully escape. It is not the case of an entirely new subscription, made under the Constitution of 1865, in disregard of its provisions and of the general statutes passed in pursuance thereof. When the arrangement of 1868 was first suggested, the court saw that the desire of its constituents for the construction of a railroad through the county was not likely to be fulfilled through the agency of, or under the contracts previously made with, the North Missouri Railroad Company. Its members became convinced that the only effectual or practicable made to accomplish that end was to make such an arrangement or combination as that made with the new company. The court was given by the statute, under which the original subscription was made, the power to 'take proper steps to protect the interests of the county;' to which end it was authorized to appoint an agent 'to represent the county, to vote for it,' &c.; and, in exercising this power, it was necessarily invested with very broad discretion. It is not an unreasonable construction of the statute to say that, in determining what steps were proper for the protection of the interests of the tax-payers, the court had authority to adopt such measures as prudent men managing the affairs of others ought to have adopted. It evidently regarded the arrangement made in 1868 as essential to the protection of the county's interests, so far as they were involved in the subscription of stock previously made, and in the obligations thereby assumed. There is nothing in the record upon which to base any imputation of collusion or bad faith. The action was taken under such circumstances of publicity as to notify the tax-payers generally of all that was doing; and we are not prepared to say that the court had not the power to transfer the subscription from the North Missouri Railroad Company to the St. Louis and St. Joseph Railroad Company, and deliver the county bonds to the latter, upon its agreement to build substantially the same road for the construction of which the original subscription had been made.

But whatever doubt exists upon this point should be resolved in favor of the bona fide holders of the bonds. The tax-payers of the county should not, under the peculiar circumstances of this case, be now heard to allege that their agents, invested by statute with the authority and charged with the duty of protecting their interests, had exceeded their powers. The court levied and collected a tax to pay interest due on the bonds delivered to the St. Louis and St. Joseph Railroad Company for the years 1869, 1870, 1871, 1872, and 1873. The coupons were annually paid for the first four years named. It is true that, at a term of the court held in August, 1871, an order was entered of record, stating that the bonds had been issued illegally and were void, and upon that ground the order recited that neither the bonds nor the coupons would be paid by the county. But in March, 1872, that order was rescinded, and the county treasurer directed to proceed with the payment of the interest. It was not until August, 1873, that the court finally determined to repudiate all obligations to pay the bonds; and under its orders the interest collected for 1873 has been retained. It further appears from the special finding that the North Missouri Railroad Company constructed its western branch from Moberly to Kansas City, running through the county for a distance of between twenty-six and twenty-eight miles; that the St. Louis and St. Joseph Railroad Company constructed its road from opposite Lexington through Richmond, locating a depot in Richmond, and continuing to the northwest boundary of said county, a distance of twenty-eight miles; that said road is completed and operated to the city of St. Joseph, Missouri; that on the first-named road there are four depots located in Ray County, and on the latter five depots; that the money realized from the sale of the bonds issued was expended in the construction of the St. Louis and St. Joseph Railroad, in the county of Ray, and, in consequence of this arrangement, the county secured the construction and operation, within its limits, of about twenty-four miles of railroad more than would have been built under the previous contract or arrangement with the North Missouri Railroad Company.

But this is not all. In payment of the county subscription and bonds, certificates of stock in the St. Louis and St. Joseph Railroad Company were issued to the county, and are still held by it. They have never been tendered for cancellation. When the court declared, in 1873, that the county would pay neither the principal nor the interest due on the bonds, no intimation was given of even its willingness to surrender the certificates.

Upon the clearest principles of justice, the tax-payers of Ray County are concluded by the acts of their official agents, and by their own failure, either intentionally or from neglect, to assert, by appropriate proceedings, their legal right (if any they ever had) to prevent the transfer of their original subscription to the company, which, by the construction of its road, gave them greater railroad facilities, and at no greater cost, than they could have obtained under the contract with the North Missouri Railroad Company.

Although this case has many features peculiar to it, the conclusion we have reached is in harmony with settled principles heretofore announced by this court in numerous cases.

It seems unnecessary to consider other points suggested in argument, as the views here expressed are sufficient to dispose of the case.

Judgment affirmed.


text: Talk:County of Ray v. Vansycle/Opinion of the Court


text:
Hawkins v. United States (96 U.S. 689)

APPEAL from the Court of Claims.

The facts are stated in the opinion of the court.

Mr. Enoch Totten for the appellant.

Mr. Assistant-Attorney-General Smith, contra.

MR. JUSTICE CLIFFORD delivered the opinion of the court.

title: Hawkins v. United States (96 U.S. 689)


text: Talk:Hawkins v. United States (96 U.S. 689)