Lyon v. Ewings

17 Wis. 61 | Wis. | 1863

By the Court,

Cole, J.

The power of a railroad company to receive from a subscriber, in payment of its stock, a promissory note secured by a mortgage on real estate — instead of being paid therefor in cash — was distinctly affirmed in Clark vs. Farrington, 11 Wis., 306; Blunt vs. Walker, id., 334; and Cornell vs. Hichens, id., 353. Since those decisions were pronounced, many other cases have come before us involving the same question of power, and have been decided in the same way. These cases were all well argued, and were considered with all the care and attention we were able to bestow upon them consist-tently with a proper discharge of our other duties And as tbe result of our best judgment upon tbe matter, we were of tbe opinion that railroad corporations, under tbe provisions of tbe various charters that came before us, bad authority to take stock subscriptions in this manner, and that in so doing they were not acting ultra vires. Tbe argument on tbe part of the'' respondent in this case was confined almost exclusively to an examination of those decisions, particularly that in Blunt vs. Walker, tbe counsel contending that we bad entirely misapprehended tbe law upon this subject, and bad placed an erroneous construction upon tbe charter of tbe Milwaukee and Mississippi Railroad Company, under which the contracts in that case and this were made. But notwithstanding this point was argued at great length and with much ability, we confess our views heretofore expressed upon this question of power remain unchanged. We still think the Milwaukee and Mississippi Railroad Company, in exchanging its stock for a note and mortgage, with the evident design of selling those securities for the purpose of raising money with which to construct its road, did not exceed its corporate powers. Eor it seems to us that the power given the directors in those provisions of the charter referred to in Blunt vs. Walker, includes the right to employ the means requisite and fairly applicable to the attainment of the ends of such power, which are not precluded by restrictions or exceptions in the charter, or are not immoral nor contrary to public policy. And we can see no essential difference in the transaction, whether the stock subscriber should himself sell his note and mortgage to raise the money with which to pay for stock, or whether the company, on exchanging its stock for such securities, should itself convert .them into money and thus raise the means to build its road. But it is not proposed at this time to enter upon a discussion of the question whether the company acted outside its charter in receiving the note and mortgage in payment of its stock. Our views and reasoning upon this subject are fully disclosed in the opinions already rendered. Another argument would necessarily go over the same ground covered in the previous decisions. It is believed that no objection was taken or authority cited to show a want of power on the part of the corporation to enter into these contracts, other than had already been raised or brought to the attention of the court in the argument of other causes. The question of power, therefore, will be permitted to rest upon the grounds upon which it has been placed; aud we will proceed to notice some, other questions raised upon the record and necessary to be considered. First, it is objected that the bond of the railroad company, for the payment of which the note and mortgage were transferred as collateral security, was void for usury. The material facts relating to this transaction were the following: The railroad company, in May, 1851, made and executed its bond containing an assignment of the note and mortgage, and, having attached together the note, mortgage and bond, delivered them so attached to its agent in this state, to be negotiated for money for its use. In January, 1852, the agent, at Bridgeport in the state of Connecticut, transferred the bond with the note and mortgage thus attached, to the appellant,- in consideration of a loan of fifteen hundred dollars made by him to the company at the time of such delivery, the coupons for interest to January 1, 1852, having been cut off and retained by the company. No contract had been made for this loan to the company previous to the time of said delivery to the appellant. The amount of the loan was received by the agent and deposited by him to the credit of the company in a bank in the city of New York, whence it was afterwards drawn out upon the order of the company. The bond draws interest at the rate of ten per cent., and the principal and interest, by the terms of the bond, were payable in New York.

If the contract is considered with reference to the laws of this state, then clearly it is valid, because the railroad company was expressly authorized to borrow money of any person or corporation at any rate of interest which might be agreed upon, any law upon the subject of usury of this state, or any other state where the loan might be effected, to the contrary notwithstanding. Chap. 64, Laws of 1851. This provision of law fully empowered the company to contract for any rate of interest which it might see fit to pay. If therefore the transaction is considered with reference to our laws, it was not prohibited by any law of usury. And that there is much reason for saying that the contract is a domestic one, and to be governed by the laws of this state, we think is manifest from the following considerations. The bond was made by the company in this state, and placed in the hands of its agent to be negotiated wherever it could be done for the best interests and advantage of the corporation. The company was organized to construct a railroad in .this state, and the money borrowed was to be used exclusively for the accomplishment of this object. The bond was secured by a note and mortgage given and payable in this state. And it is a more probable and reasonable inference that the company executed the bond wholly with reference to the laws of this state, than to say that it did so with the intention of evading the laws of some other state, upon the subject of usury.

But suppose we are mistaken in this, and that the contract must be construed with reference to the laws of New York, where the principal and interest were payable. By the law of that state a corporation was prohibited from interposing tho defense of usury in any action (Curtis v. Leavitt, 15 N. Y., 9; Butterworth v. O'Brien, 23 id., 275); and it has been held that the act applied to a foreign corporation litigating in the courts of that state. Southern Life Ins. & Trust Co. v. Packer, 17 id., 51. If therefore the place of performance is to” govern, then indubitably the railroad bond is a legal and valid obligation. And if the courts of New York would enforce this contract, for a much stronger reason should the courts of this state do so, in view of the provisions of the charter which permit the company to agree for the payment of any rate of interest on loans contracted for tbe purpose of constructing its road.

On tbe trial, tbe respondent Ewings attempted to defeat a recovery in whole or in part by showing a failure of consideration, or that be bad been injured by some action of the board of directors in reference to tbe transfer of bis stock upon tbe books of tbe company. And tbe admissibility of this defense depends entirely upon tbe question whether tbe appellant bolds these securities free and discharged from all equities existing between Ewings and tbe railroad company. We think it very clear that be does. It is not pretended that tbe appellant, at tbe time of tbe transfer, bad notice of any of these matters set up in tbe defense. And tbe fact that be took tbe note and mortgage as collateral security for money actually loaned at tbe time of such transfer upon tbe bond of tbe company, does not, within all tbe authorities, render him less entitled to tbe protection of tbe statute. Nor was there anything in tbe manner in which the note was transferred calculated to affect him with notice or put him upon inquiry. The note and mortgage were in terms made payable to tbe order of Edward D. Holtonf' who indorsed tbe note in blank without recourse. Such an indorsement we suppose transfers tbe title to and property in the note to any subsequent bolder. Therefore it is not neceesary to rely even upon tbe rule laid down in Crosby v. Raub, and Kimball v. Porter, recently decided by this court. 16Wis.,616. For here, although the payee transferred tbe note without rendering himself liable thereon, yet bis indorsement was valid according to tbe law merchant, and authorized any bolder to fill it up with his own name.

We therefore think the judgment of tbe circuit court should be reversed, and tbe cause remanded with directions to render judgment in favor of tbe appellant according to tbe prayer of the complaint.