Garrett v. May

19 Md. 177 | Md. | 1862

Goldsborougii,- J.,

delivered the opinion of this Oonrt:

On the 8th day of May 1841, the General Assembly of the State of Ohio passed an Act incorporating the Central Ohio Railroad with perpetual succession, and with authority to construct a Railroad, commencing at or near the city of Columbus, and extending eastward' to such point on the Ohio river as the directors might select.

By the 14th section of said Act, the company was empowered to borrow money on its credit, and to make and execute such bonds, promissory notes and other evidences of debt, payable, transferable and redeemable at such times and places and in such form as might be therein designated. By the 15th section, it is provided, “that for the security of the payment of such monies so borrowed, and the interest thereon, said directors may pledge, by mortgage or otherwise, their entire road, franchises, fixtures and equipments, with the income and resources thereof, together with the capital stock.”

In pursuance of this authority, the company proceeded to construct the Railroad; and, with a view of obtaining funds, executed a first and second mortgage, the provisions of which are not involved in this suit.

After the execution of the above mortgages, the Railroad Company issued certain bonds, denominated “income bonds.” The material part of which is as follows: “Eor the punctual payment of the interest and principal of said obligations, and of others of like tenor, issued or to be issued, in preference to the payment of dividends on the capital stock of said company, the income arising from the road and. its appurtenances is hereby specifically pledged. ’ ’

A portion of these bonds were entrusted to the appellants, •Robert Garrett, Henry S. Garrett and John S. Garrett, for sale or hypothecation.

The appellee, Henry May, by his agent, Henry Oelrichs, purchased five of these bonds,' on the 24th day of March 1855, for which he paid, through his agent, the consideration money to the appellants, the Garretts. Josiah Lee & Go. also purchased fifty of these bonds.

The Railroad Company executed a third deed of mortgage on the first day of March 1855, in favor of the appellants, Thomas Swann, Johns Hopkins and Gustav W. Lurman, as mortgagees and trustees. The purpose of which deed was “to provide for the funding of the floating debt, and to raise money therefor, by loan, to an amount not exceeding $850,000.

The appellees, Henry May and Josiah Lee & Co., feeling themselves aggrieved "by the conduct of the Railroad Company, in executing this third mortgage, filed their hill of complaint in the Superior Court of Baltimore city, on the 29th day of .February 1856, and this bill was so filed in behalf of themselves and all other creditors of the Railroad Company. The complainants prayed for an injunction to restrain the appellants, the Garretts, from selling the bonds issued in pursuance of the power conferred by the third deed of mortgage.

By an agreement of the parties, filed on the 6th of February 1858, “the original complainants constituting the firm of Josiah Lee & Co., and all allegations relating thereto, are to be stricken out of said bill of complaint. The bill is to be considered as the bill of complaint of Henry May, Bonus Barnum, William Carstangan, Daniel W. Warneken, Edward Boninger and Robert Letor, tbe last two trading as Boninger Brothers.”

Tbe grounds on which relief is sought, are, that the five “income bonds” of the appellee, May, were bought by him from the appellants, the Garretts, who had been for a long time previously the agents of the Railroad Company, and, as agents, entrusted with the custody and disposal of these “income bonds,” and of others of like tenor and effect, and, with a view to bettor negotiation of them, the company, as well as its agents, especially John S. Garrett, did declare and affirm that the said “income bonds” were to be secured or provided for by a deed of mortgage, then about to be executed by the company, on all its imoperty and effects, subject to two preceding mortgages; and that the manner in which the “income bonds” were to be secured or provided for, in the third deed of mortgage, was by converting the “income bonds” into bonds secured by the third mortgage. That similar representations were made to others than the appellant, May.

That when this mortgage was executed, no provision was made for the better securing the “income bonds,” as the company was bound to do.

' That the company, being insolvent, delivered to the Garretts all, or nearly all, the bonds secured by the third mortgage, and that they then held them either as agents of the company, to raise money thereon, or as collateral security for, or in satisfaction and discharge of, the company’s indebtedness to them or others; but that, in either case, these “third mortgage bonds” are liable, in the hand's of the holders, to the equitable lien thereon of the complainants.

That independently of any agreement for further security in respect to the ‘ ‘income bonds, ’ ’ they were issued under authority of a law of Ohio, and, by virtue of that law, the holders of the “income bonds” are legal mortgagees of the entire property and income of the company, and, as such, entitled to priority over the holders of the “third mortgage bonds,” and that the Garretts pretend that the “third mortgage bonds” are entitled to priority over the “income bonds;” and the complainants allege that such pretences prevent the sale or disposition of their bonds at their proper value'.

The complainants then prayed for an injunction restraining the defendants from disposing of, or parting with, the bonds now held by them, and securred by the third mortgage, or from sotting up the said bonds as entitled to priority or preference over the “income bonds;” and that the complainants and holders of the “income bonds” may be substituted as preferred creditors, to the security of said deed of mortgage. The injunction was issued as ¡orayed.

At the final hearing, the Superior Court passed a decree in conformity with the prayer of the complainants, and perpetuated the injunction. From this decree an appeal was prayed and taken.

In view of the opinion entertained by this Court, upon the merits of the case, as developed by the bill, exhibits, answers and depositions, we do not deem it material to decide the question of jurisdiction raised by the appellants.

Although the allegations in the complainants’ bill may have justified the Court below in granting the injunction, yet, upon the coming in of the answers and depositions, we think the Court erred in passing' its final decree, granting the relief prayed for, and perpetuating the injunction.

The answers of the defendants are not only responsive to the bill in every material allegation, but expressly deny the general agency of the Garretts, the representations of their intention to substitute the “third mortgage bonds” for the “income bonds,” and especially deny that any authority was given or exercised to sell the “income bonds” upon any other terms than those appearing upon the face of them.

Looking then to the depositions, and excluding from our view the connection of Josiah Lee & Co. with the bill and subsequent proceedings, wo find no testimony, whatever, tending to show that any of the present appellees were induced to purchase the “income bonds” under any other considerations than those terms stated on the face of them, except Mr. May; and we are of opinion that his declarations, made to his agent, Mr. Oelrichs, were not admissible, and were properly excepted to by the appellants, And further, if any representations were made by the appellants, the Garretts, that the “third mortgage bonds” would be substituted for the “income bonds,” there is no-evidence to show that the Railroad Company gave any authority to make such representations, or, if they were made, that they came to the knowledge of Mr., May, and that he was influenced by them to make the purchase of the bonds, he now holds..

We are therefore constrained to decide that the appellees have wholly failed to establish the general agency of the appellants, the Garretts, or that they made the representations charged in the bill; and further, that no authority was vested in them to sell the “income bonds” upon any terms other than those on the face of them. That to superadd others, would have been in conflict with that well settled rule of law, that no written instrument can be explained, altered or added to by parol, which, in its application to-this case, must be observed.

The point was especially urged, in argument, that the? Railroad Company, having issued the “income bonds.,” had no legal right to execute the third mortgage, and, by so doing, committed a fraud upon, the purchasers of the “income bonds,” and deprived them of every means of deriving any pecuniary advantage from their possession. We have maturely considered the force of this point, and axe of' opinion that it is untenable..

We can perceive nothing in the stipulations of the “income bonds” which in any way precluded the Railroad Company from, executing other obligations to obtain means to complete their road. The terms of the ''‘income bonds” are specific, and the holders of these bonds must be confined to the preference given thereby. The procurement of funds other than those realized by the sale of the “income bonds,”' was but increasing the ability of the company to render the road available for the reception of income, thereby enabiing it to moot the payment of the interest and principal of these bonds. The third mortgage indicates none other than a legitimate purpose to resort to such means as would promote the ultimate purpose for which the company was created.

( Decided December 5th, 1862.)

Order reversed, and bill dismissed, with costs to appellants.