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Sage v. Central Railroad Company/Opinion of the Court

This proceeding was commenced by a bill filed at the suit of Charles Alexander and others, holders of bonds secured by a first mortgage or deed of trust of the Central Railroad Company of Iowa, praying for an account, for the appointment of a receiver, and for a foreclosure of the mortgage. The bill was filed to October Term, 1874, in the Circuit Court. It made the railroad company, and the Farmers' Loan and Trust Company of New York, who were the trustees named in the mortgage, parties defendant. Subsequently, at the same term, the trustees, who were also trustees under second and third mortgages, filed their original bill, as well for the benefit of the complainants in the first bill as for all other bondholders, praying also for an account for a receiver, and for a foreclosure. By order of the court, these two bills were consolidated, and the hearing of the case proceeded until the 22d of October, 1875, when a final decree was made, directing, inter alia, a sale of the mortgaged premises. On the 15th of January, 1876, Russell Sage, James Buell, and N. A. Cowdrey, on their petition, representing themselves to be holders of some of the mortgaged bonds secured by the first mortgage, were permitted to intervene as parties, to prosecute an appeal to this court, for the protection of their several interests, against the decree of Oct. 22, 1875. They have accordingly appealed; and as their appeal was not made a supersedeas, and the decree was executed by a sale, they have entered a second appeal from the confirmation of that sale.

Directing our attention first to the appeal from the decree of Oct. 22, 1875, it is observable that it raises no question respecting the validity or amount of the debts due by the mortgagors and secured by the several mortgages, nor any respecting the order in which they are entitled to payment. There is some complaint that the court, before the final decree was entered, directed certain payments to be made by the receiver for locomotives and rent of cars used upon the road, either by the receiver or before his appointment. Whether these orders were correct or not, we will consider hereafter. The appellants do not complain that the decree of the court has not determined correctly the amounts due upon the several mortgages, and marshalled them in their proper order of priority. Nor do they insist that it was not proper for the court, in view of the facts as they appeared, to order a sale of the mortgaged property. Their complaint is rather respecting the disposition which the court decreed to be made of the property, in case the trustees of the mortgage should become the purchasers. To understand those dispositions, and the reasons why they were ordered, it is necessary to observe carefully the provisions of the deed upon which the bill was founded, and which, therefore, properly affected the decree. Some of them are quite peculiar. The first mortgage was given to the Farmers' Loan and Trust Company of New York, to secure the payment of bonds of the railroad company to the amount of $3,776,000, with interest thereon. It covered the entire corporate property of the mortgagor, constructed or to be constructed, and all its franchises and privileges,-all its property that might thereafter be acquired, including machinery, locomotives, rolling-stock, tools, and supplies, as well as the net income of the mortgagor. It contained also the usual stipulation made in railroad mortgages, that in case of default in the payment of interest the principal should fall due; that the trustee, on the written request of a majority of the holders of the bonds, should be authorized and empowered to take possession of the property, and sell it at public auction. It is unnecessary to refer to the other provisions, except the following, which are special and unusual, and have a material bearing upon the decree of which the appellants complain. These we quote at large:--

'And it is further covenanted and agreed by and between the parties hereto, that in case of any judicial foreclosure sale, or other sale of the premises embraced in this mortgage, under the decree of any court having jurisdiction thereof, based upon the foreclosure of this mortgage, and the holders of a majority of the then outstanding bonds secured by this mortgage shall in writing request the said trustee or their successor, they are authorized to purchase the premises embraced herein for the use and benefit of the holders of the then outstanding bonds secured by this mortgage. And having so purchased said premises, the right and title thereto shall vest in said trustees, and no bondholder shall have any claim to the premises or the proceeds thereof, except for his pro rata share of the proceeds of said purchased premises, as represented in a new company or corporation to be formed for the use and benefit of the holders of the bonds secured hereby, and the said trustee may take such lawful measures as deemed for the interest of said bondholders, to organize a new company or corporation for the benefit of the holders of the bonds secured by this mortgage. Said new company or corporation shall be organized upon such terms, conditions, and limitations, and in such a manner, as the holders of a majority of said outstanding bonds secured by this mortgage shall, in writing, request or direct, and said trustee so purchasing shall thereupon reconvey the premises so purchased by them to said new company or corporation.'

It was a mortgage containing these stipulations that the Circuit Court was called upon to enforce. And the several bondholders claiming under the mortgage held their interests subject to this controlling power given to the majority of all the holders.

There were two subsequent mortgages of the same property, given by the railroad company to the same trustee, to secure the payment of other bonds. These were set forth in the bill; and when the consolidated case was ripe for a decree, it appeared that there was due from the company for principal and interest of the first-mortgage debt the sum of $4,623,334.99 in gold, with interest from Oct. 15, 1875; upon the second mortgage, $1,136,246.86; and that there were $420,000 of bonds, secured by the third mortgage, outstanding. The court therefore decreed that the mortgagors should pay within ten days the sum due to the bondholders under the first mortgage; and if they failed to pay, that the mortgagees under the second and third mortgages and the judgment creditors, or any of them, in the order of their respective liens, should pay the same; and that in default of said payment by any of said parties, their equity of redemption in the premises should be foreclosed.

Had this been all, the result would have been a strict foreclosure. The master to whom the case had been referred had found and reported that the property would not sell at the date of his report (Oct. 11, 1875) for more than forty cents on the dollar of its indebtedness, and this report had been confirmed. It was therefore manifest that neither the railroad company nor any of the lien creditors subsequent to those holding under the first mortgage could or would pay the $4,620,334.99 thereby secured. But a strict foreclosure was undesirable for all the parties. Not only would it have cut off entirely the bondholders secured by the second and third mortgages, whose interests were before the court, and which it was bound to protect as far as possible, but it would have made the large number of bondholders under the first mortgage practically tenants in common of the railroad property. The inconveniences of such a result are obvious enough. A sale, therefore, was for the interest of all, and to that no one objected. Indeed, it was contemplated as possible in each of the three mortgages. The bondholders, through their trustee, had made arrangements in view of such a contingency. They had agreed what should be the effect and consequence of a judicial sale. All of them had taken their bonds with knowledge of the agreement and subject to it. What that agreement was, what purpose it was intended to subserve, against what mischief it was proposed to guard, and by what mode it was stipulated the object object intended should be accomplished, it is very important to consider. By the agreement, the entire body of the bondholders consented to place their interests, to a certain extent, under the control of a majority of their number. Their trustee was authorized to purchase the property at the judicial sale, should one be ordered, and convey it to a new corporation, to be formed for their benefit, provided a majority of them should, in writing, request such a purchase. They had agreed to more than this. They had consented that the new corporation should be organized upon such terms, conditions, and limitations, and in such manner, as the holders of a majority of the outstanding bonds secured by the mortgage should, in writing, request or direct. This consent and agreement, this deposit of power in the majority, was contained in the mortgage under which the appellants claim.

The purposes sought to be accomplished by it are manifest.

First, It was designed for protection against the perils of a forced sale of an unsalable property for cash. It was well known that at judicial sales of railroads for cash there is little likelihood of obtaining a bid for a sum at all commensurate with the value of the property sold, or with the amount of incumbrances upon it. The amount required is so large usually, that it is beyond the reach of ordinary purchasers. In such a case as the present, the first-mortgage bondholders are the only party that can become the purchasers, and they only, because they need not pay their bid in cash.

Secondly, The agreement looked farther. It provided for the contingency of a purchase by bondholders under the mortgage. But such a purchase could not inure equally to the benefit of all, unless all were parties to it. There is almost a certainty that in foreclosure sales of a railroad, especially when the mortgage debts exceed the market value of the property, as in this case, the purchaser will be an association of some of the bondholders secured by the mortgage, who buy with the intention of organizing a new company to hold the property for their interests. Where the bondholders are numerous, diversities of views respecting the new organization may be expected, and they generally arise. Very rarely do all the bondholders unite in making the purchase. Frequently there is more than one combination, and a strife between them to secure the advantage hoped for from the purchase and consequent control of the property. The result is that those who do not belong to the successful combination are excluded from those advantages, and are not placed upon an equal footing with the others.

Thirdly, Another evil, that observations shows to be very frequent, is that the arrangements for purchasing the mortgaged property and organizing a new company, desired by the majority of the bondholders, and which would be for the equal benefit of all, are resisted by a small minority, unless they, the minority, are paid in full, or superior advantages are conceded to them, at the expense of their fellows.

It was in view of all this that the first-mortgage bondholders entered into the agreements contained in the mortgage, the agreements which we have quoted. They provided that there should be no judicial sale for cash, unless the amount bidden at the sale should equal the sum due and secured by the mortgage. Instead of such a sale they provided a method by which all the bondholders with equal rights might effect a reorganization of the indebted corporation, and become the owners of the franchises and property mortgaged. This mode was the creation of a new corporation in which the property should be vested, for the equal benefit of all the holders of the bonds, thus preventing any minority or any bondholders from demanding that their wishes and interests should be given a preference to those of others in like condition, or that they should be paid in whole, or in part, in cash. So the agreement was in part intended to guard against the evils resulting from the want of unanimity among those whose rights were exactly the same, and the possible necessity of raising money to pay off non-assenting holders of the bonds. It was to secure the common interests of all the bondholders, in such a manner that none should obtain an advantage over the others, that it was agreed the purchase might be made by the trustee on account of all, and that the subsequent disposition of the subject of the purchase should be for the common benefit of all. To carry out these intentions a majority of the bondholders was empowered to act controllingly for the entire body, in matters respecting the purchase and disposition of the property purchased, subject to the limitation that the purchase, if made by the trustee, should be for the use and benefit of the outstanding bonds; that the property should be conveyed to a new company which should be organized for their benefit, on such terms, conditions, and limitations as the holders of a majority of the outstanding bonds should request or direct. The agreement, though unusual, was a reasonable one. While it prevented a small minority of the bondholders from forcing unreasonable and inequitable concessions from the majority, it did not empower that majority to crush out the rights of the minority, or subject them to any disadvantage. It authorized only such arrangements as would inure equally to the benefit alike of the majority and the minority.

Such was the contract and such the power conferred upon a majority of the bondholders. It was such a contract which the bills brought before the Circuit Court for a decree. In view of its provisions we cannot think it was error to decree, as the court did, that the mortgaged property should be sold to the highest and best bidder, and that the trustee should be authorized and directed to bid at the sale, as trustee for the first-mortgage bondholders, at least the amount of principal and interest of the first-mortgage bonds.

The decree went farther. At the time when it was made it appeared that a large majority of the first-mortgage bondholders had, in writing, requested and directed the trustee, if becoming the purchaser, to convey the property to a new corporation, organixed substantially on the terms, conditions, and limitations prescribed in the decree which the court made.

The request was an attempted exercise of the power conferred upon that majority by the mortgage. The trustee, the cestui que trust, and the trust itself were before the court, and the court undertook a complete execution of the trust. It decreed as follows:--

'That if said trustee, as aforesaid, shall become the purchaser of said property at such sale, the title shall pass absolutely to said trustee, subject, however, to the trusts herein indicated on behalf of the several parties in interest, being the first, second, and third mortgage bondholders, creditors and stockholders of the Central Railroad Company of Iowa; and said property shall be conveyed by said trustee to a corporation organized, or to be organized, for the purpose of acquiring said property, under the provisions of said first mortgage, and of this decree, and to the approved by a majority of said first-mortgage bondholders, in which said corporation the controlling interest and power of management shall be given to the first-mortgage bondholders in such manner as the majority of such first-mortgage bondholders shall indicate and provide, and in which the second-mortgage bondholders shall receive a second class of stock for the full amount, principal and interest, of said second-mortgage bonds; and in which corporation the third-mortgage bondholders and general creditors shall receive common stock at par for the respective amounts due them; and in which the stockholders of the defendant shall receive common stock at the rate of one dollar in the new corporation for every three dollars of stock held by them in the defendant corporation.'

Against this part of the decree the appellants present several objections. They urge that it was unauthorized by the prayer in the bill of complaint, and was not responsive thereto. It is true the bill contained no specific prayer for such directions; but beyond the relief specifically asked the complainants prayed for such other and further relief as the nature of the case should require, and as might seem meet to the court. The specific relief sought was a strict foreclosure; but under the prayer for general relief it is not questioned that the decree for a sale was appropriate. And as the deed of trust was made a part of the bill, and provided what should be done in case the trustee became the purchaser at the sale, it does not appear to be going outside of the case to enforce the agreement contained in the deed, into which the railroad company, the trustee, and, through the trustee, all the bondholders had entered.

A second objection is that in this part of the decree the court attempted to force inconsistent duties and trusts upon the trustee, different from those the parties had established by contract under seal, viz. by the mortgage deed. The meaning of this is, as we understand it, that the decree directs a disposition of the property variant from the one stipulated for in the deed of trust. At first sight this objection seems to be not without merit. But after a careful examination of the deed, bearing in mind also the purposes sought to be accomplished by it, the mode prescribed for the accomplishment of those purposes, the powers vested in the majority of the bondholders, and the subordination of the trustee to those powers, we are unable to say that the decree was unwarranted. We cannot say that the majority transgressed the power they possessed, in their arrangement for the organization of the new company, and, consequently, that the decree of the court carrying out that arrangement directed a disposition of the property different from that to which all the bondholders had assented. The primary object of the deed was to secure to the bondholders a prior right to the entire property, the subject of the trust,-so far as it was needed for the full payment of the bonds. The decree preserves this right in all its entirety. It directs that in the new corporation to which the trustee is ordered to convey, the controlling interest and power of management shall be given to the first-mortgage bondholders in such manner as the majority of them shall indicate and provide. It subordinates to their rights all the interests of the second and third mortgagees, as well as those of the general creditors and the stockholders of the railroad company, foreclosing entirely the equity of that company.

The agreement in the deed of trust (a similar one being also in the second and third mortgages) contemplated a substantial reorganization. It was for this that the power was given to the majority of the bondholders. The power was coupled with a large discretion. The majority was authorized to define the 'terms, conditions, and limitations' under which the new company should be organized. What those should be was thus left to the discretion of the donees of the power. 'Terms, conditions, and limitations' are broad words. Let it be conceded that the new organization must be for the benefit of the holders of the first-mortgage bonds, how can we say it is not for the benefit of those holders that entirely subordinate interests are conceded to junior lien creditors and to the stockholders of the former corporation? How can we say that such a concession was beyond the discretion with which the agents of the bondholders, that is to say, the majority, were clothed? Such concessiones are generally made in reorganizations of railroad companies, and they are regarded as beneficial to the joint lienholders. They prevent delay and expenditure arising out of litigation between creditors, which are sometimes almost ruinous, and they lessen the risk of redemptions. The majority were empowered to direct the terms and conditions under which the new corporation should exist, and hold the property conveyed to it, as well as the limitations within which it might act. It is not intended that the majority could postpone the rights of any minority of the bondholders to those of other creditors, or allow any interference with those rights. Nothing of the kind has been done. Under the agreement the appellants, as well as the other bondholders, had, in case of a purchase by the trustee, no claim to the property purchased or to the proceeds thereof, 'except for their pro rata share of the proceeds as represented in a new company,' to be formed in the manner, and upon such terms and conditions, and with such limitations, as a majority of their associates may direct.

Upon the whole, therefore, we think the decree of the court, in the particular we are now considering, is consistent with the agreement of the bondholders contained in the deed of trust, and, therefore, that this objection of the appellants should not be sustained.

We see no error in the decree, so far as it required any other person than the trustee under the first mortgage, if he became the purchaser at the sale, to pay at once in cash a part of his bid, as earnest money. Such other purchaser, of course, must be a cash purchaser, at least to the extent of the sum due on the first mortgage. It was, therefore, no hardship to require an immediate payment by him of a part of his bid, and the order that he should make such payment was a protection against false or unreal bids. That the same requirement was not made of the trustee was very proper, for the reason that a purchase by the trustee required no payment of money, beyond a sum sufficient for costs, unless the bid exceeded the sum due on the first mortgage, the purchase being made for the first-mortgage bondholders.

The appellants further object to certain orders made by the court for payment by the receiver to John S. Newberry et al., to Isaac M. Cate et al., to Mowery Car Company, and to Haskell, Barker, & Co., for rolling-stock, furnished under lease or otherwise, for the railroad. These orders were no part of the decree of Oct. 22, 1875. These orders were made prior to that time, when the appellants were not parties to the suit, except through their trustee. They did not intervene and become parties until after the decree of October 22 was made. Then they were permitted to become parties 'so far as to prosecute, if they so elected, for the protection of their several interests therein, an appeal to the Supreme Court from the decree entered Oct. 22, 1875.' They asked for nothing more. They prayed for no appeal from any prior orders, and certainly they cannot be permitted now to object to orders made prior to that decree,-orders from which they have not appealed. But if this was not so, it would be sufficient to say that the orders were not erroneous. They were within the rules we announced in Fosdick v. Schall (supra, p. 235), and it is sufficient to refer to that case for their justification.

The appellants further object that the eighth paragraph of the decree was erroneous. That paragraph is as follows:--

'Eighth, That the right of the several parties to this suit claiming liens by judgment or otherwise upon the property of defendants, and of the several parties claiming rights or equities in and to said property, or any property in the use of said railroad company, or any part thereof, by virtue of contracts, or cases whereby material, labor, or property has been furnished for or placed upon said defendant's road, shall not be affected by this decree, the same being taken subject to the rights and equities of said parties as the same may be established and declared hereafter by this court.'

This order relates to the effect of the decree, and not to the effect of a sale made under it, as the appellants seem to think. It reserves certain rights claimed for further adjudication. It cannot well be understood without reference to the nature of the claims and their condition when the decree was made. This appears in the report of the master, to which there was no exception in these particulars. The claims were judgments amounting in the aggregate to about $13,000, recovered against the railroad company for injuries to persons and property, and which were liens prior to the mortgages. From some of these appeals had been taken. There were also judgments inferior to the liens of the three mortgages, and other judgments not claimed to be liens at all, and there was a floating debt. It was impossible to determine definitely the extent of the rights of these various claimants, when the sale was ordered, and no one could have been injured by reserving them for subsequent adjudication. This objection, therefore, has no weight.

One other remains. The appellants assign for error that the decree is in one particular illegal, incongruous, and contradictory, in this: that while in the first paragraph the right of redemption is barred as to the railroad company, the defendant, the second and third mortgage bondholders, and the judgment creditors, it is given in the seventh paragraph to the second and third mortgage bondholders, the general creditors, and the stockholders of the defendant company, 'thus apparently denying the right of redemption to the railroad company and to the judgment creditors.' The assignment does not complain that a right of redemption was given to those to whom it was accorded. It rather complains that it was denied to the railroad company and to the judgment creditors. If such be the meaning of the decree, how can the appellants complain of it? To them it works no injury, and those who might complain have not appealed. Besides, if the other portions of the decree are correct, as we have endeavored to show, redemption by anybody is, to say the least, extremely improbable, if nor impossible. We cannot avoid the conviction that this assignment of error is not the assertion of a real grievance.

The appellants are the holders of about six per cent of the first-mortgage bonds. They are endeavoring to overturn an arrangement agreed to by a large majority of the bondholders appointed by themselves to make an arrangement for the reorganization of the debtor company,-an arrangement sanctioned by the court, which does not lessen their security or postpone them to any other bondholders, but which preserves to its fullest extent all the rights assured to them by the mortgage. They ought not to succeed without the most substantial reasons. We do not find such reasons in the record, and the decree of the Circuit Court is affirmed.

Of the second appeal, that taken from the decree of August 31, 1877, confirming the master's report of the sale, little need be said. The errors assigned to it are substantially the same as those we have considered in the former case, and held to be insufficient to justify a reversal of the decree of Oct. 22, 1875. There are two or three other objections, only one of which, however, requires any notice. The others are wholly without merit.

It is objected that the decree and order required notice of the sale to be advertised in a newspaper printed in the city of New York, called the 'Financier,' as well as in other newspapers; that the master did not advertise the sale in that newspaper, nor report his inability to find any such newspaper to this court, in which the former appeal was then pending, and therefore did not comply with the order of the court. At the time when the sale was made there was no supersedeas in existence, and before the sale was advertised it was represented and made to appear to the circuit judge that the 'Financier' had been merged into the 'Public,' or that its name had been changed to the 'Public.' He therefore, on the 8th of January, 1877, ordered that the notice of sale be inserted in the 'Public' with the same effect as if the name of the paper had not been changed, and he directed the order to be entered of record. The sale was thus accordingly advertised.

Now, whether the judge had authority to make such an order in a recess of the court, it is not worth the while to inquire, for if he had not, advertisement in the 'Public' was a substantial compliance with the original order. If the name of 'Financier' was merely changed, the identity of the newspaper remained, and the order was to advertise in that newspaper. And so if the 'Financier' was merged into the 'Public,' its subscribers and readers, to whom the advertisement was addressed and required to be addressed, were reached by it, as they would have been had there been no merger or change of name. The purpose of the order to advertise in that newspaper was publicity, and to reach those persons who saw the paper. That purpose was not defeated by a change of name or a union with another newspaper. This objection, therefore, is formal rather than substantial. The case requires nothing more.

Decree affirmed.

MR. JUSTICE CLIFFORD, MR. JUSTICE MILLER, and MR. JUSTICE HARLAN dissented.


text: Talk:Sage v. Central Railroad Company/Opinion of the Court

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Hoge v. Railroad Company

APPEAL from Circuit Court of the United States for the District of South Carolina.

The Richmond and Danville Railroad Company, a stockholder in the Atlanta tnd Richmond Air Line Railway Company, filed its bill against the taxing officers of South Carolina to enjoin them from levying any State, county, or municipal taxes upon the property of the last-named company within that State. The court below granted the prayer of the bill, and the taxing officers brought this appeal. The remaining facts are stated in the opinion of the court.

Mr. Le Roy F. Youmans, Attorney-General of South Carolina, for the appellants.

The only ground upon which the claimed exemption is sought to be maintained is that the Air Line Railroad Company was by its charter invested with the rights, privileges, and immunities of the Greenville and Columbia Railroad Company, and that the latter is, for the first thirty-six years of its existence, exempted from taxation. The bill does not aver that the charter is in express terms excepted from the provisions of sect. 40 of the act of 1841, and they are, therefore, to all intents and purposes, as much a part of it and of any amendment thereof as if they had been fully and at large incorporated therein. The power to revoke the charter as it originally existed or was subsequently modified having been thus reserved by positive enactment, all the chartered privileges, rights, and immunities of the Air Line Company were subjected to State control. Tomlinson v. Jessup, 15 Wall. 454. But had the bill set up a case resting on the allegation that the charter of the Air Line Company was virtually, although not in terms, excepted from that section, the appellants contend that to incorporate by implication such a provision into a charter is unwarranted. All grants of special powers or immunities are construed strictly against the grantees and in favor of the State. Jackson v. Lamphire, 3 Pet. 280; Beaty v. The Lessee of Knowler, 4 id. 108; Providence Bank v. Billings § Pittman, id. 514; Charles River Bridge v. Warren Bridge, 11 id. 420. And more especially where the taxing power is concerned, implications are never admitted to create or continue an exemption from its exercise; for 'there is no subject over which it is of greater moment for the State to preserve its power than that of taxation.' Tomlinson v. Jessup, supra.

Such exceptions are uniformly and emphatically restricted to clear and unambiguous grants in express words. West Wisconsin Railway Co. v. Supervisors, 93 U.S. 595. But by the provisions of that section the exception to its operation must be expressly declared in any subsequent act granting a charter, a renewal, an amendment, or a modification thereof. There is no such exception in the charter of the Air Line Company or in the amendment of 1868, and whatever exemption, if any, which that company may have originally had, does not inure to the consolidated company. Morgan v. Louisiana, id. 217.

Mr. Skipwith Wilmer and Mr. William E. Earle, contra.

The Air Line Railroad Company was incorporated in 1856, by a charter which invested it with all the rights, privileges, and immunities granted to the Greenvill and Columbia Railroad Company, and was therefore, to the same extent as the latter company, exempted by an irrepealable law from taxation for the period of thirty-six years. Humphrey v. Pegues, 16 Wall. 244; Tomlinson v. Branch, 15 id. 460; Philadelphia & Wilmington Railroad Co. v. Maryland, 10 How. 376; ''The State ex rel. Greenville § Columbia Railroad Co. v. Hood'', 15 Rich. (S.C..) 177.

The act to 1841 embraces only the charters to which the legislature thereafter granting them intends that it shall be applicable. By its existence on the statute-book, it becomes applicable, in the absence of any thing to the contrary; but if the legislature determines that it shall not, in a given case, be applied, no particular form of expression is required to execmpt from its operation any subsequently granted charter. The question then is narrowed down to the intention of the legislatute which granted the charter of the Air Line Company. If it intended to grant an irrevocable immunity from taxation for thirty-six years, and from the operation of the act of 1841, the grant is valid. New Jersey v. Yard, 95 U.S. 104. Although it did not in express terms suspend that act, yet it by apt words it evinced an intention to do so, then no restrictions thereby imposed can defeat such intention.

The immunity, if conferred upon the Air Line Company, continued unimpaired not only up to the time of the authorized consolidation with the Georgia Company, but the consolidated company was entitled to it so far as the property in South Carolina was concerned. Delaware Railroad Tax, 18 Wall. 206; Tomlinson v. ''Branch, supra; Central Railroad, &c. Co. v. Georgia'', 92 U.S. 665.

The distinction between a privilege granted in an amendment by which the grantor gains nothing and the grantee loses nothing, a grant which is in the nature of a nudum pactum,-is marked and fully recognized in Miller v. Wryman, 3 Pick. (Mass.) 211. Where the exemption is granted as a part of the original act of incorporation, or by an amendment which requires new duties, the benefit to accrue to the State, as they are imposed on the grantee, constitutes a consideration which makes a binding contract that no subsequent legislation can impair. Herrick v. Rutland, 10 Vt. 530; Sharpe v. Rutland & Burlington Railroad Co., 27 id. 146; Wilmington Railroad Co. v. Reid, 13 Wall. 264; Trustees of Dartmouth College v. Woodward, 4 Wheat. 518; Fletcher v. Peck, 6 Cranch, 87.

The rule that a grant by a State of powers and special exemptions is construed most strictly against the grantee can never be strained to the extent of defeating the legislative will or revoking a contract.

MR. JUSTICE FIELD delivered the opinion of the court.

title: Hoge v. Railroad Company


text: Talk:Hoge v. Railroad Company

title: Talk:Hoge v. Railroad Company


text:
Hoge v. Railroad Company/Opinion of the Court

The Richmond and Danville Railroad Company, a corporation created under the laws of Virginia, is the owner of twenty-two thousand shares of the capital stock of the Atlanta and Richmond Air Line Railway Company, a corporation created under the laws of Georgia and South Carolina, and brings the present suit to enjoin the collection of taxes assessed upon its road and other real property in the latter State, alleging that they are exempt from taxation. Its claim to exemption arises in this wise: A company known as the Air Line Railroad Company in South Carolina was incorporated in 1856 by the legislature of that State and authorized to construct a railroad between certain designated points, and to equip, use, and enjoy the same, 'with all the rights, privileges, and immunities granted to the Greenville and Columbia Railroad Company under the act incorporating the same and the several acts amendatory thereof,' so far as they were applicable. The company was also empowered to unite with an other railroad company and to consolidate their management, and, by an amendment to its charter, to adopt any other corporate name which it should deem best. In pursuance of this authority, it united in 1870 with a company incorporated under the laws of Georgia, known as the Georgia Air Line Railroad Company, and took the name of the Atlanta and Richmond Air Line Railway Company.

The Greenville and Columbia Railroad Company was incorporated in December, 1845, and, by a provision in its charter, the stock of the company and the real estate it might purchase, connected with or subservient to its works, were exempted from taxation for the period of thirty-six years. At the time of its incorporation there was a law of the State in force, enacted in 1841, establishing the principles on which charters of incorporation were thereafter to be granted, the forty-first section of which provides 'that it shall become part of the charter of every corporation which shall, at the present or any succeeding session of the General Assembly, receive a grant of a charter, or any renewal, amendment, or modification thereof (unless the act granting such charter, renewal, amendment, or modification shall, in express terms, except it), that every charter of incorporation granted, renewed, or modified as aforesaid shall at all times remain subject to amendment, alteration, or repeal by the legislative authority.'

The act incorporating the Greenville and Columbia Railroad Company excepted its charter in express terms from the operation of the act of 1841; but the act incorporating the Air Line Railroad Company in South Carolina made no such exception with respect to its charter. It is contended, however, that by the provision conferring the same rights, privileges, and immunities which the Greenville and Columbia Railroad Company possessed, the Air Line Company not only acquired immunity from taxation for the same period, but that such immunity was placed beyond legislative repeal. The Constitution of the State, adopted in 1868, having required that the property of corporations then existing, or thereafter created, should be subject to taxation, except in certain cases, not applying here, subsequent legislation, passed in conformity with this requirement, imposed a tax upon the property of railroad companies, including that of the Atlanta and Richmond Air Line Railway Company, notwithstanding the exemption mentioned. The present suit was thereupon brought to enjoin its enforcement. The court below held that the property of the company was exempt from taxation for the period of thirty-six years from the date of its charter, and enjoined the officers of the State from collecting the tax assessed. From its decree the present appeal is taken.

By the law of 1841 every charter of a corporation in South Carolina subsequently granted, amended, or modified was subject to repeal, amendment, or modification by the legislature; unless specially excepted from such legislative control in the act granting the charter, amendment, or modification. Such is evidently the meaning of the forty-first section of that law, though the intention is inaptly expressed. This construction is somewhat different from that placed it in Tomlinson v. Jussup, reported in 15th Wallace, and gives the legislature a more extended control. But it is the construction to which a more careful examination of the language has led us. By it the legislature said, subsequent charters should be subject to repeal or amendment, unless they were in express terms excepted from its control in the acts granting them; and that existing charters, if subsequently amended or modified, should stand in the same position. Its provisions constituted the condition upon which every charter was afterwards granted, amended, or modified. They formed as much a part of the new or amended charter as if they had been originally embraced in it. They did not of course operate as a limitation upon the power of succeeding legislatures so as to control any repugnant legislation, but so long as they remained unrepealed, subsequent legislation, not repugnant in its terms, was to be construed and enforced in accordance with them. Railroad Company v. Maine, 96 U.S. 499.

As the act incorporating the Air Line Company in South Carolina in 1856 contained no clause excepting its charter from the provisions of the law of 1841, they must be held applicable to it. To include in that charter an exemption from legislative control because such exemption was possessed by the Greenville and Columbia Company would be to thwart the declared will of the legislature, that such exemption should not exist, unless the act granting the charter excepted it in express terms from that law. Its charter must, therefore, be read as if it declared that its capital stock and the real property purchased by it and connected with or subservient to its words should be exempt from taxation for the period of thirty-six years, unless the legislative should in the mean time withdraw the exemption. Its stock and real property were thus exempted for that period from the general tax levied upon property of that kind, unless the legislature should specifically direct otherwise.

If it be assumed, however, that by the act incorporating the Air Line Company it acquired not only the immunity from taxation which the Greenville and Columbia Company possessed, but also its original exemption from future legislative control, this exemption ceased when the company obtained an amendment to its charter in September, 1868, before its consolidation with the Georgia Company. By that amendment the charter of the company was at once brought under the control of the legislature by virtue of the act of 1841, the act granting the amendment containing no clause excepting the charter from the provisions of that act.

In whichever way the legislation of the State may be viewed, the same result follows,-that the legislature of South Carolina was not inhibited from subjecting the property of the company to taxation, to reatrain the collection of which this suit is brought.

The power of the legislature of a State to exempt particular parcels of property of individuals or of corporations from taxation, not merely during the period of its own existence, but so as to be beyond the control of the taxing power of succeeding legislatures, has been asserted in several cases by this court, although against this doctrine there have been earnest protests by individual judges. But though this power is recognized, it is accompanied with the qualification that the intention of the legislature to grant the immunity must be clear beyond a reasonable doubt. It cannot be inferred from uncertain phrases or ambiguous terms. The power of taxation is an attribute of sovereignty, and is essential to every independent government. Stripped of this power, it must perish. Whoever, therefore, claims its surrender must show it in language which will admit of no other reasonable construction. If a doubt arise as to the intent of the legislature, it must be solved in favor of the State.

It follows that the decree of the court below must be reversed, and the cause be remanded with directions to dismiss the suit; and it is

So ordered.


text: Talk:Hoge v. Railroad Company/Opinion of the Court


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Denver v. Roane

APPEAL from the Supreme Court of the District of Columbia.

The facts are stated in the opinion of the court.

Mr. Albert Pike for the appellants.

Mr. Joseph H. Bradley and Mr. S. S. Henkle, contra. The

MR. JUSTICE STRONG delivered the opinion of the court.

title: Denver v. Roane


text: Talk:Denver v. Roane

title: Talk:Denver v. Roane


text:
Denver v. Roane/Opinion of the Court

The bill filed in this case was not an ordinary bill for the settlement of partnership accounts. James Hughes, the complainant's testator, and James W. Denver and Charles F. Peck were in partnership as attorneys and counsellors-at-law from 1866 until the 18th of March, 1869. On that day it was agreed between them virtually that the general partnership should terminate; that thereafter no new business should be received in partnership, and that any coming to the firm through the mails should be equitably divided. The agreement, however, contained a stipulation that the business of the-firm theretofore received and then in hand should be closed up as rapidly as possible by the members of the firm 'as partners, under their original terms of association and in the firm name.'

Soon after, on the 13th of August, 1869, a further agreement was made to the effect that in case of the death of any one of the partners, his heirs or personal representatives, or their duly authorized agent, should receive one-third of the fees in cases nearly finished, and twenty-five per cent in other partnership cases. Denver acceded to this second agreement, with the understanding that before any such division should be made, at any time, all partnership obligations should be first satisfied, proposing no new terms, only stating the legal effect. We think this was a closed contract.

It is upon these two agreements the bill is founded. Hughes died on the 21st of October, 1873, and Roane, the executor of his will, has brought the present suit for a discovery, and to recover from the surviving partners the share of the testator in the fees received by them out of the partnership business which remained unfinished when the general partnership was dissolved. A decree having been entered against the defendants in the court below, they have appealed to this court, and have assigned numerous errors. Of most of them it will be necessary to say but little, and, indeed, in regard to most of them there has been hardly any controversy between the parties during the argument.

It is first insisted by the appellant that the court below had no competency or jurisdiction to entertain a bill for such relief as is prayed for, nor to give such a decree as the court gave, whereby it attempts to settle and close the affairs of a partnership by decreeing specific sums as legally due, and if so demandable at law, and providing for the further continuance of the partnership and collection by virtue of its decree of other like sums until the business of the partnership may end. Such is the first assignment of error. The objection misapprehends the nature of the case made by the bill, overlooks the facts, and does not state accurately the decree. That a bill in equity may be maintained by the personal representatives of a deceased partner against the survivors to compel an account, so far as an account is possible, and for a discovery of the partnership property which came to their hands, is undeniable, and such was the object of the present bill. When the firm was dissolved in March, 1869, for general purposes, the agreement of dissolution stipulated that, as to the business then in hand, the members of the firm should continue partners, and should close it up. What that business was, the present defendants only could know, after the death of Hughes, for it was then left in their hands, and they only could know what fees had been received on account of it. A bill for discovery, as well as for distribution of the fees received, was, therefore, plainly within the province of a court of equity. And as the partners had agreed, as they did by the agreement of August, 1869, to divide those fees in certain proportions, it was quite competent for the court to enforce fulfilment of the contract, so far as was possible when the decree was made. The court did not attempt to make a complete settlement of the affairs of the partnership. In the nature of the case that was impossible. Some of the partnership business remained unfinished, and fees uncertain in amount were yet to be collected. But so far as fees had been collected, the right to immediate distribution was complete. The agreement did not contemplate that all the fees collected might be held by the surviving partners until all the partnership business should be brought to an end, and it was, therefore, quite proper to reserve consideration of the fees yet to be received after they shall have been earned.

An objection raised by several other assignments of error (particularly the sixth, seventh, eighth, ninth, eighteenth, and nineteenth) is, in substance, that the court erred in applying to a partnership between lawyers and claim agents the principles of the law of commercial partnerships, in regard to the modes of settlement of the same after the death of a partner, and in regard to the neglect of the business of such a firm by a partner; that by the decree no compensation is allowed to the survivors for carrying on the unfinished business, but that they are required to continue it as well for themselves as for the benefit of the deceased partner's estate. We think these objections to the decree ought not to be sustained. We are not convinced that during his life Hughes (except perhaps in reference to a single case in charge of the firm) was guilty of such neglect, or violation of his duty to his partners, as should deprive him or his personal representative of a right to share in the profits of the partnership. In regard to the work done and the fees received after his death, the parties, by their agreements, prescribed the rule for determining their rights as against each other. Having jointly undertaken the business intrusted to the partnership, all the parties were under obligation to conduct it to the end. This duty they owed to the clients and to each other. And as to the unfinished business remaining with the firm on the eighteenth day of March, 1869, the duty continued. The agreement provided for that. Now, in reference to this duty the law is clear. 'As there is an implied obligation on every partner to exercise due diligence and skill, and to devote his services and labors for the promotion of the common benefit of the concern, it follows that he must do it without any rewards or compensation, unless there be an express stipulation for compensation.' Story, Partn., sects. 182, 331; Caldwell v. Leiber, 7 Paige (N. Y.), 483. So it is held that where partnerships are equal, as was true in the present case, and there is no stipulation in the partnership agreement for compensation to a surviving partner for settling up the partnership business, he is entitled to no compensation. Brown v. McFarlam, Executor, 41 Pa. St. 129; Beatty v. Wray, 19 id. 516; Johnson v. Hartshorne, 52 N. Y. 173. This is the rule in regard to what are commonly called commercial partnerships, and the authorities cited refer to those. There may possibly be some reason for applying a different rule to cases of winding up partnerships between lawyers and other professional men, where the profits of the firm are the result solely of professional skill and labor. No adjudicated cases, however, with which we are acquainted, recognize any such distinction. And in the present case, as we have said, the parties made arrangements for the work and results of work after the death of any of their number. The agreement of Aug. 13, 1869, provided that in case of the death of any partner, one-third of the fees in cases nearly finished, and one-quarter of the fees in other partnership cases, should belong to the representatives of the decedent. Of course, it was contemplated that the surviving partners should finish the work, and that no allowance should be made to them beyond the share of the fees specified in the agreement.

The most important objection to the decree which has been urged by the appellant is that it adjudged to the complainant one-third of the fee collected by the defendants in the case of Gazaway B. Lamar against the United States, including the claim of D. A. Martin. That case was in charge of the firm before the agreement of March 18, 1869, was made, and was commenced in 1868. It was, therefore, one of the cases within the purview of the agreement of Aug. 13, 1869. Hughes's name appeared on the record as attorney and counsel with the appellants for the claimant. But on the 9th of January, 1873, he came into court and asked that his name be erased as such attorney, and that he have leave to withdraw his appearance and sever his connection with the cause. His motion was allowed, and his appearance was then withdrawn. The appellants, however, went on with the case. Briefs were filed for the claimant on the 21st of March and the 22d of April, 1873, the case was argued on the 20th of May, and on the 2d of June next following the court entered a judgment for the claimant. An appeal was then taken to this court, which was subsequently dismissed. After the withdrawal of his appearance and the severance of his connection with the cause, Hughes took no part in prosecuting the claim, neither in the Court of Claims nor in the Supreme Court, and he paid no attention to it. He quarrelled with Lamar, and about the time he withdrew from the cause he denounced the claim privately to one of the judges of the Court of Claims as altogether without merit and a fraudulent case, or words to that effect, and said that he had decided not to be involved in a case of so scandalous a character, and for so worthless or unworthy a client. In regard to the question of fees in the case, the judge testifies, 'he declined to have any interest in the case, or to take fees, because he believed the case was a corrupt one, and not likely to succeed, and that he would not lose much by his withdrawal from the case.'

The question presented by this state of facts is whether, inasmuch as the case was afterwards conducted by the appellants to final success, and they received a fee from Lamar, the claimant, Hughes would be entitled to any part of the fee were he now living. If not, certainly his personal representative cannot be now. The recovery of the claim was undertaken by the firm without any agreement respecting fees. By undertaking it the firm and each member of it assumed to conduct the case to a final conclusion, and with all fidelity to the client. Such was the contract of Hughes with Lamar, as completely as if he had been the sole attorney and counsel employed. And as the contract was entire, he could not have abandoned it after a partial performance, and still have held the other party bound. Much less could he have accompanied his abandonment by denouncing the honesty of the claim to one of the judges of the court whose province it was to find the facts and adjudicate upon its merits, and yet claim compensation for services rendered. Such conduct on his part was not merely a renunciation of his engagement to the client. It was a flagrant breach of professional duty. It was not in his power to refuse performance of his part of the implied contract with Lamar, take action hostile to the claim, and still hold Lamar bound. Certainly he could not hold Lamar directly liable. And we do not perceive that, in equity, his situation is any better because he had contracted with the client jointly with his copartners.

If, then, by abandoning the case and denouncing it as fraudulent, he lost all the right which he had against Lamar, how can he claim from his copartners any of the compensation they obtained for conducting the case after his abandonment to final success? His action was a breach of his duty to those partners, as well as of his obligation to Lamar. By the agreement of copartnership he had undertaken to share in the labor, and to promote the common interests of the firm, and that was the foundation of his right to share in its earnings. It may be that mere neglect of his duty would not have extinguished that right, but a repudiation of his obligations, refusing to act as a partner, or to perform the functions of a partner, is quite a different thing. It may well be considered as a repudiation of the partnership. It was said in Wilson v. Johnstone (16 Eq. Ca. Abr. 606), 'He who acts so as to treat the articles as a nullity as it regards his own obligations, cannot complain if they are so treated for all purposes.' It may, therefore, very justly be held that by his action Hughes became a stranger to the case, and repudiated any relation he had previously held to it as a partner in the firm. The partnership ceased as respects that claim. The other partners who continued to attend to the case could charge the client nothing for his services, for as the contract was contingent on success, nothing was due to any partner until success was attained. They certainly could claim nothing for services rendered by him after he severed his connection with the case, for he rendered none; and if he had any just claim on a quantum meruit for services rendered before, it was against Lamar, and not against his copartners.

We think, therefore, the decree of the court below was erroneous, in so far as it allowed to the complainant any part of the fee collected from Lamar or from Martin, who owned a part of what was recovered in the Lamar suit.

We discover no other fault in the decree, but for this the case must be sent back for correction.

The decree of the Supreme Court of the District will be reversed, and the record remitted with instructions to enter another decree in conformity with this opinion; and it is

So ordered.

title: Denver v. Roane/Opinion of the Court


text: Talk:Denver v. Roane/Opinion of the Court


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Brooklyn v. Insurance Company

ERROR to the Circuit Court of the United States for the Northern District of Illinois.

This action was brought by the AEtna Life Insurance Company, a corporation of the State of Connecticut, against the town of Brooklyn, in the State of Illinois, upon certain interest coupons detached from bonds issued in the name of that town. Besides the general issue, the defendant filed four special pleas.

The second plea, in substance, avers that the coupons in suit and the bonds to which they were attached were issued and delivered by the supervisor and town clerk of the town for stock claimed to have been subscribed to the Chicago and Rock River Railroad Company, an Illinois corporation, organized under an act approved March 24, 1869, and thereby authorized and empowered to locate, construct, and complete a railroad from a point on the south side of Rock River, near Sterling, via Amboy, crossing the Chicago and Burlington Railroad, thence to intersect the Chicago branch of the Illinois Central Railroad, outside of the corporation at Chicago; that the company, in order to induce the town to subscribe to its capital stock, pretended, by its officers and agents, to lay out the line of railroad through the town and near the village of Maluguis Grove, thence to its terminus on the Chicago branch of the Illinois Central Railroad, and gave out that it was about to construct and complete its road, and thereby establish a through line to Chicago, wholly independent of and a competing line with the Chicago, Burlington, and Quincy Railroad, which passes a few miles south of Brooklyn; that on 20th September, 1869, an election was held to determine whether the town should subscribe $50,000 to the stock of the company; that the notices for the election expressly stated that no bonds in payment of any subscription should be issued, draw interest, or be delivered to the company, until the railroad was completed and cars running through Brooklyn; that a majority of the voters at such election voted to make the subscription; that on 23d May, 1870, William Holdren, the acting supervisor of the town, signed and executed as such a certain paper, purporting to subscribe $50,000 in the name of the town to the capital stock of the company, which subscription provided that it was made upon the express understanding set forth in the notices of election, and that no payment was to be made until the road was completed and the cars running through the town; that the supervisor of the town had no authority or power to issue any bonds or coupons to the company until the road should be completed, which has never been done; that just before the issuing of the bonds and coupons it was rumored in the town that the railroad was about to be transferred to the Chicago, Burlington, and Quincy Railroad Company, and was not to be built and completed as required by the notices of election and the terms of subscription; that thereupon the agents and representatives of the Chicago and Rock River Railroad Company were notified that if the road was not to be built and completed as promised, the bonds and coupons would not be issued and delivered; whereupon said agents and representatives informed the town and the citizens thereof that the company intended to complete the railroad as promised, and as fast as men and money could do so; that thereupon the supervisor and town clerk, raying upon such representations, but having no power or authority so to do, did, on or about Nov. 7, 1872, sign, issue, and deliver, in the name of the town, to the agents and representatives of the company, bonds to the aggregate amount of $50,000, with coupons attached, part of which are those sued on; that as soon as the bonds and coupons were received by the company it utterly ceased and refused to prosecute the construction of the road, and abandoned the entire work, whereby the town failed to obtain any railroad to Chicago, or a competing road with that of the Chicago, Burlington, and Quincy Railroad; that the representations aforesaid of the company's agents were knowingly false and fraudulent, but their falsity was unknown to the town, its supervisor, and clerk when the bonds were issued and delivered, and the issuing and delivery were procured by such false and fraudulent representations; that the bonds and coupons are wholly void and in no wise obligatory upon the town, because the company had not at the time they were issued complied with the conditions prescribed by the election notices and the subscription; that the town claims no interest in the stock of the company, which is worthless, and has been ever since the work was abandoned, and has received no value whatever for the bonds and coupons.

The third plea avers that the insurance company 'is not a bona fide assignee of the interest coupons declared upon in said declaration, before maturity and without notice of the defences set up in the second plea.'

The fourth plea avers that the bonds and coupons 'were issued by the supervisor and town clerk of said town of Brooklyn, and delivered without the authority of the board of auditors or the corporate authorities of said town; and the supervisor of said town who issued and delivered the same acted therein fraudulently and in collusion with the parties to whom the same were delivered, the said supervisor knowing at the time he had no such authority, and he having been elected supervisor on the express pledge on his part, and with the understanding between him and those who voted for and supported him, that he would not issue and deliver said bonds and coupons until said Chicago and Rock River Railroad was completed its entire length to the Chicago branch of the Illinois Central Railroad.'

The fifth plea avers that by a decree of the Circuit Court of Lee County, Illinois, rendered Nov. 14, 1873, in the action of the town of Brooklyn and others against the Chicago and Rock River Railroad Company and others, 'it was ordered, adjudged, and decreed that the said pretended bonds and coupons of the said town of Brooklyn, so issued to the said Chicago and Rock River Railroad Company, and registered as aforesaid in the office of the auditor of public accounts of Illinois, are void and in no wise obligatory on the said town of Brooklyn, and that the same be surrendered up by the parties holding the same to be cancelled,' which decree it is averred is in full force and effect; that the said insurance company was made defendant in such suit with the other holders and owners of the bonds and coupons issued by the town, by the name and description of 'the unknown owners of certain bonds and coupons issued by Washington J. Griffin, the supervisor of the town of Brooklyn, Lee County, Illinois, to the Chicago and Rock River Railroad Company, purporting to be the bonds and coupons of said town of Brooklyn;' that said Circuit Court of Lee County had then and there jurisdiction of the subject-matter and the persons or parties defendant therein, by the issuing and return of process, and by proof of publication made as required by the statute of the State of Illinois in case of non-resident defendants.

To the plea of the general issue a joinder was filed, and to the third plea a replication was filed, averring that the insurance company became a bona fide assignee of the coupons declared upon before maturity, and for value, without notice of the defences set forth. To the second, fourth, and fifth pleas there was a general demurrer.

Upon the calling of the case for trial, the plaintiff moved the court 'that a jury come to try the issue joined upon the plea herein. It is thereupon considered by the court that a jury came to try said issue, and thereupon came a jury, &c.,. . . who were. . . sworn, well and truly to try said issue, and after, &c.,. . . returned into court the following verdict, to wit: 'We, the jury, find the issue for the plaintiff, and assess its damages to the sum of $5,511." Judgment was thereupon rendered for the plaintiff. Upon a subsequent day of the term, the town, by its attorney, moved the court to set aside the judgment and grant a new trial, but filed no grounds therefor in writing. The town failing thereafter to appear and sustain its motion, the same was overruled and the judgment ordered to stand in full force. The town then sued out this writ of error.

The errors assigned are, that the court below erred, 1st, in sustaining the demurrers to the second, fourth, and fifth pleas; 2d, in rendering judgment on the verdict of the jury.

Mr. Milton, T. Peters for the plaintiff in error.

A general demurrer should not be sustained to special pleas, setting up a substantial defence, though the matter of them might be given in evidence under the general issue. The objection can be reached only by a special demurrer, or a motion to strike them from the files. Pendleton County v. Amy, 13 Wall. 297.

It is the established ruling of this court that to preclude a municipal corporation from insisting that it is not liable to pay its bonds and coupons, issued without the precedent performance of the conditions prescribed by statute, its constituted authorities must not only have decided that such conditions had been performed, but their decision must appear in the recitals of such bonds. Otherwise purchasers are not protected, if the non-performance of such conditions be shown. Town of Coloma v. Eaves, 93 U.S. 484; Town of Vienna v. Murdock, id. 494; Marcy v. Township of Oswego, id. 637; Humboldt Township v. Long et al., id. 642; Commissioners v. Bolles, 94 id. 104; Commissioners v. January, id 202; Commissioners v. Clark, id. 278; County of Warren v. Marcy, 97 id. 96.

If the pleadings on the part of the plaintiff do not aver such recitals, the estoppel does not arise. The plea setting up such non-performance is a valid defence to the action, where, as in this case, the plaintiff demurs instead of setting up in a replication such recitals by way of estoppel. Pendleton County v. Amy, supra. A want of authority to issue bonds is fatal to their validity, even though held by an innocent purchaser for value. They are void where the vote of the town authorized their issue in a certain contingency which never occurred. Township of East Oakland v. Skinner, 94 U.S. 255; Bissell v. City of Kankakee, 64 Ill. 249; Decker et al. v. Hughes et al., 68 Ill. 40; Burr et al. v. City of Carbondale, 76 id. 470; Barnes v. The Town of Lacon, 84 id. 461; Middleport v. AEtna Life Insurance Co., 82 id. 568; Supervisors of Jackson County v. Brush, 77 id. 59; People v. Dutcher, 56 id. 149; Dillon, Mun. Corp. 524.

The foregoing decisions of the Supreme Court of Illinois establish that the issue by the supervisor and town clerk of bonds before the completion of the road having been expressly prohibited by the vote of the town, the subscription to the stock of the company was unauthorized, and that bonds issued in payment therefor are void. Those officers are not of themselves, in the constitutional sense of the term, the corporate authorities, and cannot, without the consent of the people, be clothed with the discretionary power of creating a debt. People v. Solomon, 51 Ill. 37; People v. Mayar, id. 17; Lovingston v. Wilder, 53 id. 305; Marshall et al. v. Silliman et al., 61 id. 218; Dunnavan et al. v. Green, 57 id. 60; Decker et al. v. Hughes et al., 68 id. 33; Wiley et al. v. Silliman et al., 62 id. 170; Town of Elmwood v. Marcy, 91 U.S. 289. The proper tribunal to decide whether the road had been completed was the board of auditors, or corporate authorities of the town. The legislature could not deprive them of their legal and constitutional right to determine that fact, nor confer the authority upon the supervisor and town clerk.

By the vote the issue of the bonds was only authorized on the actual completion of the road, and not when the supervisor and town clerk should declare that such completion was an accomplished fact.

The second plea expressly negatives any presumption that the officers who issued the bonds had decided that the conditions of their issue had been performed. It alleges that such officers were induced to issue and deliver them upon the false and fraudulent assurances of the company, that it would thereafter complete the road. This has never been done. The road was abandoned by the company immediately upon its obtaining the bonds.

Recitals, if made by the supervisor and town clerk in the bonds that such conditions had been performed, would be unauthorized by the Constitution of the State, the act of the legislature authorizing such subscription and the issue of bonds, the vote of the people, the contract of subscription, and the actual facts.

After the court had sustained a general demurrer to the second, fourth, and fifth pleas, the defendant did not further appear. On motion of the plaintiff, a jury was called 'to try the issue joined on the plea herein.' The jury found the issue for the plaintiff. There having been two issues joined, the jury only determined one, leaving the other undisposed of. The judgment on that verdict is erroneous, and should be reversed.

Mr. O. J. Bailey and Mr. J. H. Roberts, contra.

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

title: Brooklyn v. Insurance Company


text: Talk:Brooklyn v. Insurance Company

title: Talk:Brooklyn v. Insurance Company


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

The questions presented for consideration upon this writ of error seem to have been concluded by the former decisions of this court.

The facts set out in the second plea do not constitute a defence to this action. It is not averred in that plea that the insurance company had, at the time it purchased the coupons in suit, any knowledge or actual notice of the special conditions embodied in the election notice, and repeated in the formal subscription of May 23, 1870. Nor is it therein alleged that the bonds to which these coupons were originally attached contained recitals indicating that the subscription had been voted and made upon any conditions whatever. The defendant in error was undoubtedly bound to take notice of the provisions of the statute under which the bonds had been issued. But it was under no legal obligation to inquire as to the precise form or terms of the subscription, whether it was absolute or only conditional.

Had the insurance company, before consummating its purchase of the coupons, examined the act incorporating the Chicago and Rock River Railroad Company, it would have ascertained: 1st, That the statute made no provision for conditional subscriptions. 2d, That upon the approval by a majority of the legal voters of any incorporated city, town, or township, along or near the route of the road, at an election called and held for such purpose, in the mode prescribed by law, it was made, by the express words of the statute, the duty of the president of the board of trustees, or other executive officer of such town, and of the supervisor of such township, to make the subscription voted for, receive certificates therefor, and execute to the company bonds of the required amount, bearing interest, payable annually, and signed by such president, executive officer, or supervisor, and attested by the clerk of the municipality it whose name the bonds were issued. 3d, That, within ten days after the approval of a subscription by popular vote, it was the duty of the clerk to transmit to the county clerk a statement of the vote given, the amount voted, and the rate of interest to be paid; and, within like period, after bonds were issued, to file with the county clerk a certificate showing the amount and number of bonds issued, and the rate of interest to be paid. If it be suggested that the statement thus directed to be transmitted to and filed with the county clerk would inform the purchaser whether the subscription was conditional or absolute, a sufficient response is, that such statement might have been in conformity with the letter of the statute without setting forth the precise nature of the subscription. But a conclusive answer is, that there is no averment that any such statement was prepared, transmitted, or filed, or if filed, that it indicated the conditional nature of the subscription, by reference either to the election notice, or to the formal subscription of May 27, 1870. The plea shows that 'the town and the citizens' (to adopt the language of the plea) were assured by the agents and representatives of the railroad company that the latter intended, in good faith, to perform the special conditions annexed to the subscription, and that all rumors to the contrary were without just foundation. These assurances were credited, and, in reliance upon them, the supervisor and clerk executed and delivered the bonds, knowing, at the time, that the conditions imposed by popular vote, as well as by the terms of the subscription, had not been complied with. Thus was faith in the promises of a railroad company substituted for a contract which, had the town stood upon it, would either have secured the construction of the road, as contemplated, or guarded its people against a burden which has been imposed upon them through the fraudulent conduct of railroad officials, and the violation, by its own officers, of the trust committed to them. By the act of the town's constituted authorities, who, by the statute, had the right, under certain circumstances, to execute and deliver the bonds and coupons, the railroad company was enabled to put them upon the money market in advance of the construction of the road. It is now too late for the town to claim exemption, as against bona fide purchasers, upon the ground that the railroad company disregarded its promise to construct the road, or upon the ground that its own officers delivered the bonds in violation of special conditions, of which the purchasers has no knowledge or notice either from the statute or otherwise. The remedy of the city is against the railroad company, and its own unfaithful officers, who, it is alleged, were in fraudulent combination with the company.

For the reasons already stated, the fourth plea must also be held to be insufficient. The bonds were signed by the officers designated for that purpose by the charter of the railroad company, and, after the vote and subscription, it does not seem to have been necessary that the board of auditors or other corporate authorities of the town should have participated in their issue and delivery.

The fifth plea is radically defective. The suit commenced and determined in the Circuit Court of Lee County was a proceeding wholly in personam, against the holders and owners of bonds and coupons which had been issued in the name of the town, and delivered to the railroad company. Upon principle and authority, no decree therein rendered could bind any one not personally served with process, or who did not appear. It could not affect the rights of non-resident holders of bonds and coupons, proceeded against by constructive service. Such service, as to them, was ineffective for any purpose whatever. Pennoyer v. Neff, 95 U.S. 714, and authorities there cited.

We come now to consider the remaining assignment of error, viz., that the court erred in rendering judgment upon the verdict. This objection rests upon the ground that although there were two issues to try,-those arising under the first and third pleas,-the jury were sworn to try 'the issue,' and found only 'the issue' for the defendant in error.

We observe, from the record, that after the demurrer to the second, fourth, and fifth pleas was sustained, the city failed to appear, by attorney, at the trial before the jury. After verdict, a motion was entered to set aside the verdict and judgment and grant a new trial. But no written grounds were filed in support of the motion. Nor did the city appear at the hearing of the motion, and urge any reason for its being granted. It was, consequently, denied, and, in this court for the first time, specific objection is made that the jury were sworn to try, and, in fact, tried but one issue, and that it is impossible from the orders of the court to say what issue was tried. We decline to consider the objection. If the attention of the court below had been called to this matter, the objection might have been obviated. There is no bill of exceptions showing to what point the evidence was directed, and we will assume, under the circumstances of the case, that all the issues were tried which were presented in due form for trial, or which the parties desired to be disposed of. Laber v. Cooper, 7 Wall 565.

Our conclusion is that no error was committed in the court below.

Judgment affirmed.

MR. JUSTICE BRADLEY did not sit in this case, nor take any part in deciding it.


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


text:
United States v. Winchester

APPEAL from the Court of Claims.

The facts are stated in the opinion of the court.

The Attorney-General for the appellants.

Mr. Joseph S. Fowler and Mr. John Pool, contra.

MR. JUSTICE FIELD delivered the opinion of the court.

title: United States v. Winchester


text: Talk:United States v. Winchester

title: Talk:United States v. Winchester


text:
United States v. Winchester/Opinion of the Court

The claimant is the surviving executor of the will of John C. Jenkins, who died in 1855, leaving four minor children, and possessed of a plantation in the State of Mississippi, on the Mississippi River, above Vicksburg. By directions in the will, the plantation was to be cultivated by the representatives of the estate for the benefit of the testator's children.

On the 18th of February, 1863, there was on this plantation belonging to the estate and raised thereon according to the provisions of the will, a quantity of cotton, one hundred and sixty-eight bales of which were on that day seized by the naval forces of the United States, and taken on board of a government steamer. The cotton was then carried to Johnson's Landing, on the river, and thence to Milliken's Bend; where, with other cotton, making in all two hundred and fifty-eight bales, it was shipped on board of the transport 'Rowena,' by order of Admiral Porter, who was in command of the naval forces on the Mississippi.

In March following, the admiral reported the capture of this cotton to the Secretary of the Navy, and was informed, in reply, that all property captured as 'prize property' must be sent to a prize court for adjudication, and be disposed of as the court might decree; and that the disposition of captured 'abandoned property' was provided for by an act of Congress of March 12, 1863. The cotton was thereupon sent to Cairo, where it arrived on the 7th of April, 1863, and was delivered to Captain Pennock, commanding at the station, and was by him turned over to the United States marshal of the district. Soon afterwards, upon information given by Captain Pennock, the United States district attorney filed a libel in the District Court of the United States for the Southern District of Illinois for the condemnation and sale of the cotton as forfeited to the United States. The libel stated that the seizure was made by order of Admiral Porter, on the Mississippi River, that river 'being a public water of the United States, navigable to the sea by vessels of ten or more tons burden;' and that the seizure was made for violation of the Non-Intercourse Act of July 13, 1861, and the proclamation of the President of Aug. 16, 1861; and because the property belonged to a person in armed rebellion against the government of the United States; and that the case was within the admiralty jurisdiction of the court. The case then proceeded, in accordance with the forms of admiralty practice and entitled as in admiralty, to a decree condemning the property as forfeited to the United States. The decree was subsequently opened as to part of the property, and the libel was amended by striking out the first allegation as to the Non-Intercourse Act, which was inapplicable to the cotton belonging to the estate of Jenkins and seized on his plantation.

Pending the proceedings, the cotton was sold, and by the decree one half of the proceeds was paid into the treasury, and the other half ordered to be paid to Captain Pennock, as informer, to whom a check for that amount was delivered. Captain Pennock handed the check to Admiral Porter, his superior officer. The admiral, unwilling to receive or keep it as informer, sent it to the Secretary of the Navy, requesting that the money might be distributed among the officers and crews of the Mississippi squadron as captors. The secretary refused to distribute the money, and returned the check to the admiral, and he deposited it with the assistant treasurer at St. Louis, upon whom it was drawn.

Treating the proceedings in the District Court as in admiralty, they are without validity. The admiralty jurisdiction of the District Court extends only to seizures on navigable waters, not to seizures on land. The difference is important, as cases in admiralty are tried without a jury, whilst in cases at law the parties are entitled to a jury, unless one is waived. United States v. Betsey, 4 Cranch, 443; The Sarah, 8 Wheat. 391.

But it is contended by the Attorney-General that the proceedings, however loose and defective in form, can be sustained under the Confiscation Act of July 17, 1862, upon the charge that the property was seized as belonging to a person in armed rebellion against the government of the United States. Assuming that upon a vague allegation of this kind, without designation of the owner, and with an erroneous statement in the libel of the place of seizure, a valid decree of condemnation could be rendered under the act of 1862, previous to the passage of the Captured and Abandoned Property Act, it is contended on the part of the claimant that by the passage of this act the provisions for confiscating property, in the act of 1862, are impliedly repealed, as being repugnant to those of the latter act. We do not think so. We agree with the Court of Claims on this point.

The whole scope and purpose of the two acts are different. The first act provides for the punishment of treason, the seizure, condemnation, and sale of property of persons engaged in the rebellion, and the payment of the proceeds into the treasury, to be applied to the support of the army of the United States. It was directed against persons committing certain overt acts of treason, and against their property. Its object was to punish the persons and to confiscate their property, and contemplated in the latter proceedings equally as in the former the intervention of judicial authority.

The second act was designed to reach all property, with few exceptions, in the insurgent States, seized or taken from hostile possession by the military or naval forces of the United States, whether belonging to friends or enemies, as well as property taken while the owner was voluntarily absent and engaged in aiding or encouraging the rebellion. It provided for a sale of the property thus captured or abandoned without judicial proceedings, and the payment of the proceeds into the treasury, allowing the loyal owner who had never given aid or comfort to the rebellion the privilege of pursuing the proceeds in the Court of Claims. There was also a marked difference in the effect of the proceedings under the two acts. The Confiscation Act authorized proceedings only against the interest of the disloyal owner; the Captured and Abandoned Property Act directed the seizure of the property itself; and its sale carried the title against all claimants. The former also took the property wherever it was found; the latter only in the insurgent States. The former, as respects property, had all the merciless features inseparable from a war measure, and treated as enemies, whose property could be confiscated, all residents within the insurgent States; the latter had this beneficent provision, that it made a discrimination among those whom the rule of international law classes as enemies, in favor of those who, though resident within the hostile territory, maintained in fact a loyal adhesion to the government. The two acts can stand together, and the Confiscation Act be enforced as to all property seized under its provisions. The position of the claimant, as to an implied repeal from a supposed repugnancy of the provisions of the two acts, is not, therefore, tenable.

But upon another ground, apparent upon the face of the record, the proceedings and decree of the District Court cannot be sustained. There was no previous seizure of the property under any order of the executive; and such seizure was an essential preliminary to give jurisdiction to the court to adjudge its forfeiture and decree its condemnation. The executive seizure is the foundation of all subsequent proceedings under the Confiscation Act. Such is the plain import of the law, and it was so held by this court in Pelham v. Rose, 9 Wall. 103, and reaffirmed in The Confiscation Cases, 20 id. 92. Here the property was seized by the naval forces of the United States upon the notion that being property in the enemies' country, it was subject to capture as a prize of war. The Secretary of the Navy, when informed of the capture, instructed the admiral in command that the disposition of captured abandoned property was provided for by the act of March 12, 1863, evidently regarding the property as coming within that class, if not 'prize property.' No seizure by executive order is alleged in the libel, for none such was made. The seizure alleged is one made by the naval forces, and even that is stated to have been made at a place other than the plantation of the testator. No validity can be ascribed to a decree by a court which thus never had the property rightfully before it for condemnation. For one-half of the proceeds of the sale paid into the treasury under the decree the claimant is, therefore, clearly entitled to judgment.

As to the remaining half also we have no doubt. The check which Captain Pennock received under the decree of the court, included not only one-half of the proceeds of the claimant's cotton, but of cotton libelled in other cases, amounting in the whole to $59,943.42. The admiral of the squadron to whom Captain Pennock turned over the check, desired, as already stated, that the money should be distributed among the officers and crews of the Mississippi squadron as captors; and when the Secretary of the Navy declined to make the distribution, the deposited the check with the assistant treasurer at St. Louis, upon whom it was drawn. Subsequently, in July 1864, the admiral invoked the aid of the District Court of the District of Columbia to make the distribution, and placed in the hands of the district attorney a certificate stating that the amount decreed to him as informer, namely, $59,943.42, was on deposit with the assistant treasurer at St. Louis, and expressing his wish as to the distribution of the money, accompanying the certificate with a check for the amount. The District Court took jurisdiction in admiralty of the case, and ordered the check to be deposited by the marshal with the assistant treasurer at Washington, and that the money should remain in his hands subject to the further order of the court. The check was accordingly deposited with the assistant treasurer, and by a subsequent decree the court ordered the money to be distributed as desired, after the payment of certain costs and disbursements incurred in the proceedings.

It is not a question upon which contention can arise that these proceedings of the District Court of the District of Columbia were extra-jurisdictional from beginning to end; and indeed it is apparent from inspection of the decree that the court, assuming as valid the action of the Illinois court, proceeded to distribute the money more upon the request of the admiral than upon any authority conferred by law. The decree of distribution signed by the Chief Justice of the District Court shows the kind disposition of a learned magistrate to carry out the generous intentions of a gallant admiral to distribute among the officers and crew under his command money awarded to him as informer, but which he refused to take in that character, without assuming any authority beyond what the admiral implored him to exercise. But as the Illinois court had no jurisdiction to award to the admiral or his captain the money thus generously distributed, we are of opinion that the claimant must have judgment for the amount as well as for the other moiety of the proceeds of the cotton belonging to the estate of his testator.

In the views thus expressed we have merely stated, in brief, the conclusions of the Court of Claims. In the opinion of that court the questions are so fully, clearly, and exhaustively discussed as to leave nothing to be added.

Judgment affirmed.


text: Talk:United States v. Winchester/Opinion of the Court


text:
Van Norden v. Morton

APPEAL from the Circuit Court of the United States for the District of Louisiana.

The facts are stated in the opinion of the court.

Mr. Thomas J. Durant for the appellant.

Mr. John A. Campbell, contra.

MR. JUSTICE MILLER delivered the opinion of the court.

title: Van Norden v. Morton


text: Talk:Van Norden v. Morton

title: Talk:Van Norden v. Morton