« ForrigeFortsett »
solidation, and by the amendment of the charter of Chautauqua Assembly. Complainant asserts broadly that, by virtue of the alleged unconstitutional legislation specifically referred to in the bill, contract rights are impaired, and his property rights invaded and destroyed. The consolidation act changes the name of Chautauqua Assembly, and enlarges its scope, without, however, depriving complainant of his rights and privileges of membership. Section 4 of the act passed March, 1902 (Laws 1902, p. 497, c. 196) expressly provides that the members of Chautauqua Institution shall be the persons named in the original and supplemental certificate of incorpo.ation, and all persons owning one or more lots on the land of the corporation. Sections 5-7 provide for the election of 24 trustees, who are divided into Classes A and B. Annual meetings are specified. The manner of electing 20 trustees belonging to Class A, by the hold-over trustees, and 4 trustees belonging to Class B, by the members of the corporation, is provided for in the act. This right to expand and amend the charter of the Chautauqua Assembly by alteration or addition to its corporate scope cannot, in my view of this controversy, seriously be disputed. The right of reservation by the Legislature to amend and repeal corporate charters, in my opinion, is broader than is contended for by complainant. The terms employed in expressing the reserve power of the state include the right of consolidating corporations whose objects and purposes are similar. New obligations may be created; new duties may be prescribed for the trustees; investments may be made; and a stockholder cannot be heard to complain, unless such acts when done by the Legislature, impede, destroy, or impair a contract and property rights. People v. O'Brien, III N. Y. 1, 18 N. E. 692, 2 L. R. A. 255, 7 Am. St. Rep. 684. The charter of Chautauqua Assembly was altered by inclusion and addition of privileges and features which were adapted to and supplemented those of the original charter. Such features seem to be in entire harmony with the purposes and objects which the original members had in view at the time of incorporation. The expansion of the general powers of Chautauqua Assembly by the maintenance of schools, proper facilities for recreation, maintenance of libraries and museums, and publication of books on the grounds of the corporation, has been undertaken, to more effectively carry out the original purposes and objects of the Chautauqua Assembly. These changes and developments do not, apparently, alter the pecuniary liability of complainant. His property rights are not impaired or destroyed. No contract relations or obligations are impaired or defeated. His status as a leaseholder remains undisturbed, with the right to enjoy the additional privileges of the institution. True, the manner of electing trustees to manage the affairs of the corporation is perceptibly altered; but this does not, in my opinion, operate to destroy the property rights of the minority leaseholders. The changes and amendments complained of with respect to the election of trustees were entirely within the power of the Legislature to enact. It is insisted, however, that no election of trustees has been held for many years, and that in that respect the trustees have exceeded their powers, and have perpetuated themselves in office from year to year. Such
acts of omission by the trustees, however, have been acquiesced in by the minority stockholders for many years. Furthermore, the act of consolidation and reorganization of Chautauqua Assembly, as heretofore pointed out, provides for a different mode of electing trustees. Since the passage of the act of March, 1902, an election of trustees in accordance with the charter of 1902 has been held. The regularity of such election in the manner provided by law cannot be successfully controverted, assuming the law to have been a valid enactment. undoubtedly the law, as contended for by the complainant, that personal and real property acquired by a corporation, together with contract rights and choses in action, cannot be destroyed or impaired by legislative interference, and hence, the rights of a shareholder of a corporation, repealed by special act of the Legislature, cannot be invaded and destroyed without adequate and complete compensation to him. Greenwood v. Freight Co., supra; People v. O'Brien, supra. Such, however, are not the facts here presented. It appears that the corporate existence of Chautauqua University and the Chautauqua School of Theology were terminated by the state, by and with the assent of their members, who were also trustees of Chautauqua Assembly. The authority of the Legislature to repeal such charters, the legislative intent reserving the power so to do being expressed in the grant, cannot be seriously disputed, when no property rights are interfered with. Without deeming it necessary to pass upon the point, I may say that it is difficult to perceive, from the allegations of the bill-no actual fraud or conspiracy being charged-how Chautauqua University and Chautauqua School of Theology can be proceeded against. In view of the foregoing, it will serve no useful purpose to discuss any other questions involved in this controversy.
From the examination given to the questions argued and the authorities cited by counsel, I conclude, first, that the ground of demurrer that the court is without jurisdiction, is not well taken; second, that the bill lacks equity, in that it does not appear that any contract or property rights are invaded or destroyed by reason of any of the acts of omission or commission charged in the bill. The court having come to this conclusion, it is unnecessary to pass upon the questions raised by the plea. The bill must be dismissed.
CENTRAL TRUST CO. OF NEW YORK v. WASHINGTON COUNTY R. CO. (Circuit Court, D. Maine. July 6, 1903.)
In a suit by the holder of a mortgage given by a corporation to foreclose the same, stockholders and bondholders of the corporation may be permitted to intervene. Gregory v. Pike, 67 Fed. 837, 845, 15 C. C. A. 33, 41, explained and applied.
¶ 1. Foreclosure of mortgages in federal courts, see note to Seattle, L. S. & E. Ry. Co. v. Union Trust Co., 24 C. C. A. 523.
2. SAME ANSWER BY CORPORATION-AUTHORITY OF COUNSEL.
Where, in a suit to foreclose a corporation mortgage, the complainant would be entitled to a default and a decree pro confesso, if no answer had been filed, any question as to the authority of the executive officers of the corporation to employ a solicitor to answer, confessing the bill, is immaterial. It seems that, ordinarily, an answer under the seal of a corporation, by one of the principal officers, cannot be questioned.
8. SAME CONSTRUCTION OF RAILROAD-OVERPAYMENT-OBJECTION-ESTOPPEL. Where, at the time a railroad was constructed, no objection was made to the contract by which the company's stocks and bonds were issued in payment therefor, it could not subsequently be objected, after a long acquiescence, in a suit to foreclose a mortgage securing the bonds, that the actual cost of construction was only two-thirds of the par value of the bonds issued in payment therefor, and that the bonded indebtedness secured by the mortgage should therefore be scaled.
4. SAME ACQUISITION OF OTHER LINE-POWERS.
Where the charter of a railroad company authorized it to construct its main line between certain termini, and also "to build branches or extend its line into one or more towns," the railroad was empowered to purchase a railroad already constructed, and appropriate as a branch line; and it was not limited to acquiring branch lines by building them.
5. SAME-MORTGAGES-AFTER-ACQUIRED PROPERTY.
Where a railroad mortgage, in describing the property, contained the language, "and also all rights, powers, privileges, and franchises relating to or useful for the said railroad or branch, including the right to operate and maintain the same, whether now held or acquired by the mortgagor," such mortgage covered a line subsequently purchased by the mortgagor, which was an appropriate branch for the main line mortgaged.
Where, in a suit to foreclose a railroad mortgage, it appeared that the railroad at the time of foreclosure was capable of earning $100,000 annually, applicable to interest or dividends, which would pay 4 per cent. on $2,500,000, the upset price was fixed at $2,300,000.
Butler, Notman, Joline & Mynderse, and Chase Eastman, for Central Trust Co.
Mr. Littlefield, for intervening petitioners.
Curran & Curran, N. & H. B. Cleaves, and S. C. Perry, for Washington County R. Co.
Heath, Andrews & Dutton, for county of Washington.
PUTNAM, Circuit Judge. This is a bill in equity brought by the trustee under a mortgage of the Washington County Railroad Company, executed on the 10th day of March, 1898, to foreclose the same by sale as provided in the deed. The entire amount of the bonds issued was $2,320,000, bearing interest at 5 per cent. per annum. None of the coupons attached thereto have ever been paid, but no bill to foreclose was filed until this, on the 18th day of April, 1903.
The only parties to the bill are the complainant and the Washington County Railroad Company. The county of Washington, which holds all the preferred stock of the mortgagor corporation, amounting to the par of $500,000, and James Mitchell, holder of something over $70,000 of the mortgage bonds referred to, have severally asked leave to intervene. In Gregory v. Pike, 67 Fed. 837, 845, 15 C. C. A. 33, it was held that the chancellor has no power to make new parties defendant against the objection of the complainant. It was shown,
however, on page 846, 67 Fed., page 41, 15 C. C. A., that this rule does not apply to cases of the coming in of a cestui que trust, or a stockholder as stockholder, under circumstances like those at bar. It applies only where those who seek to intervene make issues which would not be disposed of so as to become res adjudicata provided they were not made parties. Under the circumstances, we deem it equitable to grant the petitions for intervention on special terms. expediting the litigation, as set out in the orders in reference thereto which we will cause to be entered.
Previous to the petitions to intervene the Washington County Railroad Company had filed an answer admitting substantially all the allegations in the bill, so that, on the face of the pleadings as they thus stood, the complainant was undoubtedly entitled to a decree. It is claimed by the county of Washington that this answer was put in by the president and the general counsel of the defendant corporation without special authority to either so to do. Ordinarily, an answer under the seal of the corporation by one of the principal officers thereof cannot be questioned. However, it is not necessary for us to consider this contention, because, if the answer were invalid, as claimed by the county of Washington, the complainant would be entitled to a default and a decree pro confesso; also, being the answer of a corporation, it is, in effect, nothing more than a pleading, and cannot prejudice in any substantial manner whatever propositions may be made by the interveners. Therefore we leave the answer to stand. Immediately on the filing of the answer, and before petitions for intervention were filed, the parties to the record submitted to the court a draft decree. Thereupon the petitions for intervention were presented to the court. The court postponed the consideration of the petitions until the coming in of the report of the special master, to whom the court referred the pleadings and the draft decree, with directions to hear the county of Washington, and Mitchell, as well as the parties to the record, and their proofs, and to include in his report his findings on the propositions which might be submitted by either of them to him, and to allow either of them to take exceptions, to be returned with his report. The report of the master has now been returned into court, with exceptions taken thereto by the county and by Mitchell, none coming from the parties to the record. Thereupon, as we have already said, we admitted the county of Washington and Mitchell as interveners, thus giving us proper jurisdiction over their exceptions.
It appears that the entire length of the railroad of the defendant corporation within the termini distinctly specified in its charter-that is, from a junction with the railroad of the Maine Central Railroad Company in Hancock county to its present terminus in the city of Calais, and its branch to Eastport, also expressly described in its charter-is 119 miles. Of this, 315/100 miles, constituting its terminus in the city of Calais, were acquired as hereinafter stated. The balance of the railroad thus expressly described in its charter, namely, 119 miles, less 315/100 miles spoken of, was constructed prior to the 30th day of June, 1899, by the parties who now hold all of the bonds secured by the mortgage in question, aside from those owned by
Mitchell, and others to the amount of the par of $4,000, with accumulated interest. The entire issue of bonds was $2,320,000, as aiready stated. In addition thereto, and to the preferred stock, there was an issue of 15,000 shares of the common stock of the defendant corporation of the par value of $100 each. The parties who thus constructed the railroad received in payment for the cost of construction 14,974 shares of common stock and $2,142,000 of the mortgage bonds in question, and on receipt of the same they entered into the control of the defendant corporation, and have ever since remained in control of it. No objection was ever made by the county of Washington, or by any person, to this arrangement, and the county, and every one concerned, acquiesced in reference thereto until the present bill was filed. It is now maintained by the county that the bonded indebtedness should be scaled down, because it is claimed that the actual cost of construction was only about two-thirds of the par of the bonds issued in payment therefor. If the court were compelled to pass on the issue, it would probably find, as a matter of fact, that the arrangement as described was in truth consented to by all the parties in interest and was satisfactory to them. However that may be, it is now too late to question the transaction in the federal courts. It is hardly necessary to cite authorities on this point, and therefore we will only refer to Pittsburg Railway Company v. Keokuk Bridge Company, 131 U. S. 371, 381, 9 Sun. Ct. 770, 33 L. Ed. 157. The transaction was neither unusual nor unreasonable. The parties constructing the railroad took their risk of gain and loss, and, apparently, if the court accepted the highest value which it has been suggested could be reasonably placed on the property, after making allowance for loss of interest, there has been neither the one nor the other to any substantial amount. Therefore there is no reason which would justify us in sustaining the proposition of the county of Washington in this respect.
In addition to the railroad, which was constructed as we have already said, the defendant corporation acquired a line, already in operation, extending from the present terminus of the defendant corporation in the city of Calais to Princeton. This was approximately 20 miles in length. Deducting the portion used by the defendant corporation for its line within its expressly chartered termini leaves the length of what was thus acquired approximately 17 miles.
The terms of this charter, followed, as it was, by the subscription to the preferred stock, shows, what is also a matter of common knowledge, that the purpose of the undertaking was to accommodate and develop the county of Washington. The whole line from Calais. to Princeton is within that county, and it is a natural feeder to the main railroad of the defendant corporation, and is naturally served by it, and the connection of the two and their practical union are apparently results which would naturally follow the general purpose of the enterprise and aid what it sought to accomplish.
The acquisition of this line to Princeton, however, was subsequent to the execution of the mortgage in question. Therefore, as we have said, the county of Washington claims that it should not be covered by this decree of foreclosure. The master found otherwise,