Board of Trustees v. Chesapeake, Railroad

94 Ky. 377 | Ky. Ct. App. | 1893

JUDGE LEWIS

DELIVERED THE OPINION OF THE COURT.

In 1867 the Elizabethtown and Padncali Railroad Company was incorporated, with power to construct and operate a railroad between those places ; and the board of trustees of Elizabethtown, having first sub mitted the proposition to voters thereof, made, on behalf of the. town, a subscription of seventy-five thousand dollars to capital stock of the company, upon condition of the road being constructed, and also that the company build .machine shops in Elizabethtown, and if it failed to do so the subscription to be mid.

Subsequently the subscription of stock was paid, the road constructed and machine shops built within limits of Elizabethtown, upon thirty acres of land purchased by the company.

In 1874 the Elizabethtown and Paducah railroad •and all its property, real and personal, used in operating it, together with franchises of the company, was sold under judgment of court, Smithers & Marcus becoming purchasers and receiving a deed therefor. And afterward, they being principal stockholders, a company was incorporated to own and operate the road under name of the Paducah and Elizabethtown Railroad Company. But in 1882, appellee, the Chesapeake, Ohio and Southwestern Railroad Company, was, by act of the Gfeneral Assembly, incorporated, and under authority given to it, purchased of the Paducah and Elizabethtown Railroad Company, having authority to sell, said road and all property, real and personal, connected with and used in operating it, as well as franchises of the vendor.

The Chesapeake, Ohio and Southwestern Railroad Company continued, after its purchase, to operate and maintain the machine shops in Elizabethtown, being the only shops owned or used on that road, until the — day of ■— 188-, when they were dismantled, and shops, instead of them, were, for consideration of fifty thousand dollars paid by the city of Paducah, erected at that place, where the machinery was taken, and all needed work of the company for which machine shops are adapted and used has since been done. And on account of that abandonement and disuse of the shops at Elizabethtown, alleged to be breach of the contract of subscription of the seventy-five thousand dollars, appellants, trustees of Elizabethtown, brought this action for damages.

In an amended petition, the failure of appellee to run through daily trains between Elizabethtown and Paducah, is made also a cause of action. Though appellee’s motion to strike out that part of the amended petition containing the additional canse of action was overruled, a general demurrer was sustained to it as well as the original petition, and the action was dismissed.

The principles by which the question of appellee’s liability for abandoning and disusing the work-shops at Elizabethtown is to be mainly determined, are stated and settled in Chesapeake, Ohio and Southwestern Railroad Company v. Griest, 85 Ky., 619. In that case the appellee sought to recover of the appellant, Ches apeake, Ohio and Southwestern Railroad Company, for a personal injury inflicted in 1881, before its purchase of the road, and while owned and operated by the Paducah and Elizabethtown Railroad Company. The latter company was also made a defendant, but was not served with process. It is true the cause of action there was a tort, for which the Paducah and Elizabethtown Railroad Company was 'directly and alone liable, while here the alleged cause of action is a breach of contract made with the original company, though not alleged to have been broken by either it or the Paducah and Elizabethtown Company, but by the Chesapeake, Ohio and Southwestern Company. Nevertheless, it was in that case held, as the record in this requires us now to hold, that the last named company was a bona fide purchaser, paying full value for the road, and, in virtue of the deed of conveyance, became distinct and sole owner of all the property and rights of its vendor, yet free of all claims of creditors. It was further held in that case to be a settled principle that where the power to sell is, by terms of its charter, given to one corporation, a purchaser for value, though also a corporation, holds the property as if it had been, an individual transaction.

The attitude of the plaintiff in this case is, however, not that of a creditor of the original corporation ; but Elizabethtown became, upon 'performance of the conditions of its subscription of seventy-five thousand dollars, invested with all the rights and bound by all obligations attaching to the position of stockholder of that company. It may be thatElizabethtown, though a stockholder, would have had a right to reparation for violation by the original company of the conditions upon which the subscription of stock was made. But neither by law nor the contract of subscription was a lien acquired on the corporate property to secure performance of those conditions to the prejudice of creditors or tona fide purchasers; and even if such lien had existed, the failure to assert it when the action was brought by creditors of the original company for sale of its. property, would amount to a waiver of it; for it is. a reasonable presumption that neither the purchasers at the judicial sale nor the Chesapeake, Ohio and Southwestern Company would have paid as much for the property if it had been then adjudged a lien existed in favor of Elizabethtown for enforcement of the condition of its subscription of stock.

But it seems to us very clear that no obligation was ever imposed upon appellee, by either the’act authorizing it to purchase the property, or by its contract of purchase, to continue indefinitely, or for any length of time, use of machine shops at Elizabethtown. According to the terms prescribed, there was a literal performance of the conditions upon which the subscription of stock was made on behalf of Elizabeth-town when the machine shops were built there. And in the absence of language showing, or from which it can be fairly implied, it was intended for the machine shops to permanently remain and be operated there without regard to public convenience and necessity certainly an action brought more than fifteen years after the transaction should not be maintained against a bona fide purchaser of the property, either for damages or other relief, upon the ground the machine shops have been disused at that place.

In 1867, when the subscription of stock was made, Elizabethtown and Paducah were intended to be terminal points of the railroad, to construct which the stock was subscribed.

In 1882, fifteen years thereafter, that road became part of a line owned by appellee, extending from Memphis, by way of Paducah, to Louisville, and by which Elizabethtown was connected by only a branch road. So that the transfer of machine shops to Paducah, not necessary in 1867, became subsequently a matter of convenience and necessity to the public as well as appellee. And as we are unable to see wherein any legal right of Elizabethtown has been violated by such transfer, or upon what principle of equity appellee’s property can be now taken or subjected to a lien of that town that never, in fact, existed, or if it existed has been waived and lost, the demurrer to the original petition was properly sustained.

2. Section 6 of “An act to incorporate the Chesapeake, Ohio and Southwestern Railroad Company,” approved January 19, 1892, contains this provision: “Provided, that if the said corporation .shall, by consolidation or otherwise, acquire the Elizabethtown and Paducah Railroad, it shall not, by reason of any branch that may be built, or otherwise, discontinue the operation of said line from Memphis to Paducah, or from Paducah to Elizabethtown, but through cars .shall be kept on the road, from Memphis to Paducah and from Paducah ’o Elizabethtown.”

Appellant did not acquire, by terms of its subscription of seventy-five thousand dollars, the right to maintain against appellee an action for failure to comply with requirement of that section. For a disregard or violation of that statute it seems to us the Commonwealth only, can maintain a proceeding or action. The demurrer to the amended petition was likewise properly overruled.

Judgment affirmed.