County of Scotland v. Thomas

ERROR to the Circuit Court of the United States for the Eastern District of Missouri.

This was a suit brought upon certain coupons attached to bonds, purporting to have been issued by the county of Scotland, in the State of Missouri.

The bonds were in the words and figures following, except that each bond had a separate number:--

'$1,000.] UNITED STATES OF AMERICA. [No. 65. 'Eight-per-cent Railroad Bond.

'County of Scotland.]

[Twenty-five years.

'Know all men by these presents, that the county of Scotland, in the State of Missouri, acknowledges itself indebted to the Missouri, Iowa, and Nebraska Railway Company, a corporation existing under and by virtue of the laws of the States of Missouri and Iowa, formed by consolidation of the Alexandria and Nebraska City Railroad Company (formerly Alexandria and Bloomfield Railroad Company) of the State of Missouri, and the Iowa Southern Railway Company of the State of Iowa, in the sum of $1,000, which sum the said county hereby promises to pay to the said Missouri, Iowa, and Nebraska Railway Company, or bearer, at the Farmers' Loan and Trust Company in New York, on the thirty-first day of December, A.D. 1895, together with interest thereon from the thirty-first day of December, 1870, at the rate of eight per cent per annum, which interest shall be payable annually, in the city of New York, on the thirty-first day of December in each year, as the same shall become due, on the presentation of the coupons hereto annexed This bond being issued under and pursuant to an order of the county court of said Scotland County, for subscription to the stock of the Missouri, Iowa, and Nebraska Railway Company, as authorized by an act of the general assembly of the State of Missouri, entitled 'An Act to incorporate the Alexandria and Bloomfield Railroad Company,' approved Feb. 9, 1857.

'In testimony whereof, the said county of Scotland has executed this bond by the presiding justice of the county court of said county, under the order of said court, signing his name hereto, and the clerk of said court, under the order thereof, attesting the same, and affixing thereto the seal of said court. This done at the town of Memphis, in the county of Scotland, in the State of Missouri, this first day of September, A.D. 1870.

'WILLIAM DAWSON,

'Presiding Justice of the County Court of Scotland County, Mo.

'Attest:

{ SCOTLAND COUNTY COURT,} 'STERLING McDONOLD,

{  MISSOURI, SEAL.'     } Clerk of the County Court of Scotland County, Mo.'

To each of which bonds were annexed twenty-five interest coupons, each for the sum of $80, maturing annually for the interest thereon. These bonds were delivered, before the 21st of December, 1871, to the 'Missouri, Iowa, and Nebraska Railway Company,' with the interest coupons attached, in payment of the subscription to the capital stock of the company; and such of them as had attached to them the coupons sued on were, before the maturity of the second maturing coupons, together with all the coupons except the ones first maturing, sold for value, and transferred by delivery to the plaintiff, who is the holder and owner thereof. The plaintiff caused the coupons sued on to be presented for payment at maturity, and payment was not made.

The petition alleged, in addition to the foregoing facts, that by an act of the general assembly of Missouri, entitled 'An Act to incorporate the Alexandria and Bloomfield Railroad Company,' approved Feb. 9, 1857, the said company was incorporated, and thereafter was duly organized under said act of incorporation; that the tenth section of said act of incorporation provides as follows:--

'The said company shall in all things be subject to the same restrictions, and entitled to all the privileges, rights, and immunities which were granted to the North Missouri Railroad Company, by an act entitled 'An Act to incorporate the North Missouri Railroad Company,' approved March 3, 1851, so far as the same are applicable to the company hereby created, as fully and completely as if the same were herein re-enacted.'

The fourteenth section of the said act of March 3, 1851, contains the following provision, to wit:--

'It shall be lawful for the county court of any county, in which any part of the route of said railroad may be, to subscribe to the stock of said company (North Missouri Railroad Company), and it may invest its funds in the stock of said company, and issue the bonds of such county to raise funds to pay the stock thus subscribed, and to take proper steps to protect the interest and credit of the county.'

That a part of the route of the road of the 'Alexandria and Bloomfield Railroad Company' was within the county of Scotland, as designated in the act of incorporation.

That in pursuance of an act of the general assembly of Missouri, entitled 'An Act to amend an act entitled 'An Act to incorporate the Alexandria and Bloomfield Railroad Company, approved Feb. 9, 1857,' approved Feb. 19, 1866,' authorizing the Alexandria and Bloomfield Railroad Company to change its name, and to extend its road from Luray, in Clark County, Mo., to Nebraska City, in Nebraska Territory, the said company did change its corporate name to that of the 'Alexandria and Nebraska City Railroad Company.'The defendant demurred; but, before the demurrer was submitted, it was stipulated between the parties that the question of subscribing to the stock of the 'Missouri, Iowa, and Nebraska Railway Company' had never been submitted to a vote of the qualified vote § of Scotland County; and that, in determining the questions raised by the demurrer, the court might consider this fact as if it had been averred in the complaint.

It was further agreed that the articles of consolidation between the Iowa Southern Railway Company and the Alexandria and Nebraska City Railroad Company, entered into March 26, 1870, and the orders of the county court of Scotland County, should be taken and considered by the court, as facts admitted in determining the questions raised by the demurrer.

By those articles, it was provided that the consolidated company should bear the name of the Missouri, Iowa, and Nebraska Railway Company; that its capital stock should be $13,000,000, to be divided into one hundred and thirty thousand shares of $100 each; that the directors might increase it when necessary, upon the approveal of a majority of the stockholders; that the line of the railway should extend from the city of Alexandria, in Missouri, on the Mississippi River, to Centreville, Iowa, thence west to the Missouri River; and that the company should assume and pay all debts owing, and all contracts or agreements entered into, by either of the companies. The company was also authorized to borrow money to an amount not exceeding two-thirds of its capital stock, issue bonds, and secure their payment by mortgage on all the property of both companies.

The material parts of the act of March 2, 1869, under which the 'Alexandria and Nebraska City Railroad Company.' and the 'Iowa Southern Railway Company,' a corporation created under the laws of Iowa, entered into articles of consolidation are as follows:--

'SECTION 1. That any railroad company organized under the general or special laws of this State, whose track shall, at the line of the State, connect with the track of the railroad of any company organized under the general or special laws of any adjoining State, is hereby authorized to make and enter into any agreement with such connecting company, for the consolidation of the stock of the respective companies whose tracks shall be so connected, making one company of the two, whose stock shall be so consolidated, upon such terms and conditions and stipulations as may be mutually agreed between then, in accordance with the laws of the adjoining State in which the road is located with which connection is thus formed.'

Sect. 2 requires that the consolidation shall be approved by the holders of a majority of the stock in each of the old companies.

Sect. 3 provides, that when the terms of consolidation shall have been agreed upon, &c., 'it shall be competent for the boards of directors in each of said connecting companies to carry the same into effect, and adopt by a resolution a new corporate name for the company, which shall be formed by the consolidaton; and to call in the certificates of stock then outstanding in each company, and exchange them for stock in the new company, as may have been agreed by the terms of the consolidation; and a copy of the said consolidation agreement, and the resolutions of consolidation, and the name adopted for the new company, shall be filed with the secretary of State,' &c.

'SECT. 4. Any such consolidated company shall be subject to all the liabilities and bound by all the obligations of the company within this State which may be thus consolidated with one in the adjacent State, as fully as if such consolidation had not taken place; and shall be subject to the same duties and obligations to the State, and be entitled to the same franchises and privileges under the laws of this State, as if the consolidation had not taken place.'

The demurrer was overruled, and judgment rendered for the plaintiff; whereupon the county suded out this writ of error.

Mr. George W. McCrary and Mr. J. O. Broadhead for the plaintiff in error.

1. The plaintiff below is not an innocent purchaser of the bonds used on, without notice.

(a.) Because the defect complained of is a want of power, and not an irregular exercise of an a mitted power.

(b.) Because the acts under which the right to issue the bonds in suit is claimed is set out in the bonds themselves, and the purchaser was put upon inquiry, and had notice of all the facts.

2. The validity of the bonds can only be sustained by showing that the county was authorized by the law as it stood prior to July, 1865, when the constitutional prohibition took effect, to subscribe to the stock of the Alexandria and Bloomfield Railroad Company, and to the stock of any company that might be formed by consolidation with it.

3. Whatever might be claimed if the old company, by its charter or the law in force prior to that date, had been vested with the power to consolidate, it is clear that, in the absence of that power, the right of the county thereafter to subscribe was a right to subscribe to the original corporation, and no other. Harshman v. Bates County, 92 U.S. 569.

4. If the intent of the act of 1869 was, as claimed, to authorize a new company to be formed by consolidation of the Alexandria and Nebraska City Railroad Company, and the Iowa Southern Railway Company, and to empower Scotland County to subscribe, without a vote of the people, to the stock of this new company, then that act is so far unconstitutional and void.

5. The consolidation effected by changing the Alexandria and Bloomfield Railroad Company into the Alexandria and Nebraska City Railroad Company, and consolidating the latter with the Iowa Southern Railway Company, by which was formed the Missouri, Iowa, and Nebraska Railway Company, was a fundamental alteration of the charter of the first-named company, not provided for or contemplated by either the charter itself or the general laws of the State, as they stood when the Constitution of 1865 was adopted.

Mr. A. J. Baker and Mr. F. T. Hughes, contra.

MR. JUSTICE BRADLEY delivered the opinion of the court.