7 F. 793 | U.S. Circuit Court for the District of Kentucky | 1881
This causo is submitted on the demurrers to the cross-bill of the Farmers’ Loan & Trust Company. Although other questions wore argued, the only questions raised are those arising oti the demurrers to the cross-bill.
The objection that the board of directors could not authorize the execution of the mortgage to the Farmers’ Loan & Trust Company, but it must have been authorized by the stockholders, is not well taken.
The charter of the Kentucky & Great Eastern Railroad Company gave the board of directors and president the general management and control of the property, business, and affairs of said company, (section 7;) and the fact that by other sections, the railroad company could only do certain
The forty-third section provides that—
Said railway company (the holders of a majority of the stock therein concurring) may agree .on terms for consolidating said company with any other railroad company, etc.; and the next section (44) provides that said company may issue and sell the coupon bonds of said company; and the forty-fifth section provides that, to secure the prompt payment of the interest and principal of said bonds, said company may execute a mortgage or deed of trust; but in neither section is it provided that the stockholders must concur.
It is quite clear, from these and other sections of the charter, that the directors and president of the company were authorized to issue mortgage bonds and secure" them upon the property of the company. Jones on Railroad Securities, § 84.
The mortgage could be legally acknowledged by the president of the company in Ohio, and it seems to be in proper form. Jones on Railroad Securities, §§ 84, 86; Kelly v. Calhoun, 95 U. S. 710; Martin v. Mobile & Ohio R. Co. 7 Bush, 177; 11 Wall. 476.
The .allegation of the cross-bill as to the issuing of the bonds, and that they are outstanding in the hands of bona fide holders, is sufficient. If these bonds were delivered in payment for work done and materials furnished, it was equally as good as if they had been sold for cash—money in hand.
The 90 days’ notice required by the forty-seventh section of the charter
The charter, section 45, gives the authority to secure the mortgage bonds by conveying “the said railroad and its property franchises.” It is unnecessary to decide on these demurrers the exact meaning of these words. It certainly gave the company the right to mortgage its property then owned, and that which it might thereafter acquire by its existing charter.
This company did not, at the date of this mortgage or at the time of its acceptance, March 5, 1872, have authority to build and run a railroad from the city of Newport, in the State of Kentucky, “upon, along, and near the southern bank of the Ohio river to a point in said state line between the states of Kentucky and West Virginia at or near Catlettsburg, Boyd county, Kentucky,” unless that authority can be derived from the authority given the company to build branches to its main stem of road.
There is nothing in the mortgage, nor is thero any allegation in the cross-bill, which indicates that any part of this line—that described in the mortgage—is a branch to the company’s “main trunk road;” on the contrary, the mortgage describes the line as “our main line.” The fair inference— indeed, the irresistible conclusion from the mortgage and the allegations of the cross-hill—is that the company never even located another line east of Maysville, hence the line east of Maysville, upon, along, and near the southern bank of the Ohio to a point at or near Catlettsburg, cannot, by any reasonable construction, be a branch of a road which was authorized to be constructed in counties other than Mason, Lewis, Greenup, and Boyd, and which, as far as this record shows, had not been located. *
The line as described would run through the counties of Mason, Lewis, Greenup, and Boyd, and it seems from the cross-hill included the line of the Maysville & Big Sandy Railroad. It alleges that W. H. Wadsworth and others were, on the fifteenth of July, 1871, the absolute and sole owners of all the property, rights, and franchises of the Maysville & Big Sandy Railroad Company, and that they, on the fifteenth of July, 1871, entered into a contract with the Kentucky & Great Eastern Railroad Company, whereby they sold to said company all the said property, rights, and franchises and interests of the said Maysville & Big Sandy Railroad
The forty-first section of the charter of the Kentucky & Great Eastern Bailroac Company authorized the president and directors, with the assent of the holders of a majority in value of the stock in said.company, to purchase and hold any other railroad in or out of the state.
The cross-bill, howevor, does not allege that the purchase of the Maysville & Big ! Sandy Railroad and its property from Wadsworth and associates was made with the assent of a majority in value of the stock in the Kentucky & Great Eastern Bailroad Company, nor was there any suggestion made in the argument of coin tsel that such was the fact.
The amendment to i.;s charter, approved March 29,1872, authorized it to construct its road through the counties of Mason, Lewis, Greenup, and Boyd. It provided, however, that, previous to eonstri eting their railroad east of Maysville, through Mason county and on through the counties of Lewis, Greenup, and Boyd, the Kentucky & Great Eastern Railroad Company should purchase and pay for the Maysville & Big-Sandy Bailroad, or malee such arrangements with its owners as should be satisfacto ry to each of said owners. If it be assumed that the allegations of the cross-bill are sufficient on demurrer to show tl at the company made a satisfactory arrangement with the owners of the Maysville & Big Sandy Railroad, the question remains whether or not the mortgage intended to convey the- line east of Maysville as future-acquired property.
The mortgage recites that the Kentucky & Great Eastern
Thus, it will be soon, this mortgage conveyed a definitely-described line, which the company claimed to have then the right to build; hence, as a question of intention and construction, it cannot be that this line—-that east of MaysvilLe, along and near the southern bank of the Ohio river—was intended to be, or was, conveyed as future to be acquired property. If, however, it had been intended to be convoyed as future-acquired property, it may bo seriously doubted if it would have passed. The mortgaging of future-acquired property by railroad companies is sustained, either upon the ground that it is .in the nature of accretions, or that the railroad company has made an executory contract, which, though void in law, will in equity bo allowed to become effective wh on and as the property comes into existence. Pennock v. Coe, 23 How. 124; Holroyd v. Marshall, 9 Jurist, 215; Phillips v. Winslow, 18 Ben. Monroe, 431.
In the case at bar there could be no accretions, because the line itself could not, at the date of the mortgage, be legally conveyed, or be owned, by the Kentucky & Great Eastern Railroad Company; nor could this company make a valid executory contract about this part of the line. It was beyond its corporate authority, and ultra vires. It may be seriously doubted whether a mortgage by a railroad company of futuro to be acquired property over goes beyond the authority which
It is, however, not necessary to decide this question in this case; but because the company had no right, as far as the cross-bill shows, to acquire the Maysville & Big Sandy Line without the concurrence of the stockholders, and the concurrence is not alleged, and because the Maysville & Big Sandy Line is not intended to be conveyed as future to be acquired property, the demurrers should be sustained.
Order entered sustaining demurrers to cross-bill of Farmer# Loan & Trust Company, and giving leave, to amend, and directing “the complainant to redraft his pleadings so as to conform to the equity practice of this court.”
“ Section 47. * * Foreclosure shall not take place until 90 days after publication of notice of the commencement of proceedings to that end shall have been made,” etc.—[Rep.
The suit was originally brought in the Mason circuit court of Kentucky, and upon application of the Farmers’ Loan & Trust Company was removed to the United States circuit court. The complainant had filed a “petition” under the Kentucky Code Practice.—[Rep.
