34 F. 278 -

they; JIlQre effect; though it: P<i, that lO!\B ()f time wOllld, ):Ie, dlJ,11gerpWft oftentiJ:l.lM.; perhaps, fata,l,H' Neverthelesl!lt we cannot PJ,ake the,lawhel'e. ' The ,plAiIJ.,tiff not being entitled, to sue in jorma,paupeJriJJ, eitller under tl1eillWe".m,tute Qrunder the generaUaWj in suits at law, we cannot by confer the privilege. ' Application ,refused· SllYiin,g,
. ;' I

i ; . r;t·

':ROGERS ,L.' & M. WORKS

'", J,

.

11.

SOuTHERN RAILROAD ASS'N·

" ,,)

',i,

'(Oircuit Go'Url,! &:D. Nt:lJJYlI1'k.' March 12, 1888.).

'R4n.RO.AJ:> COIllP,ANIEll-BoND8,Qlr MORTGAGBB-POWERiTO GUARAl'lTY BONDll Ol", OTHER '. . ,', ,; ," " . ,,'

.,' A: raiiro"d' corporation; which has power by its chatter toisllue itllOWll ' n,aaP,'owe,I' to gua,ranty ,the1;londs of another rai"lroad corporation, which itrflceives"in Ol!ht due to it. a;q!l which itsellsJorvalue, or transfers,in paym,e}1t of Its own the guarp.nty heinp;given 'as the means of, augmentlligthe credit o'f the bonds, or to enable it to"obtainan adequate pri\lll' for thei:14 '" .' , '
,; III

,At

HJ. . " SHIPMAN,: ,This is an action at law, inwhich,by writtenstipulation signed-liy the parties, a jury was waived, the <muse was tried by'the COlIl-tl·Upon such trial the following facts were 'found to have been proved,; and :to be true: The averments of the first, second, third, fourth; fifthiaiith, seventh, and ninth 'paragraphs of the complaint al'e' true,ex'Cept·thM the guaranty described in the seventh' pa.ragraph WltS' not· indorSed upon the bonds by resolution of the stockholders of the'defendant,: and with the Olllission of the words" for 'good and: valuable con':' sideratioh"'in ,said paragraph. The facts in regard to the consideration fof the said'guatanty areihereinafter specially stated. The Mississippi, Central Railroad'C01npaIiy. hereinafter called the " Mississippi Company," had to before January 26,,1874, in a large amount; fON.dvances which were made to'sa:id company for the purpose of oompletiilg its rhad. " In, settlement ,6t' -that debt ;the said! Mississippi the ,deiendantsI itS coUpon honds;"f'or the sum -of' $1;000 each\ known as "Incciine and 'E1qt\rprnent Bonds," to the·aIilOunt of These bdnds include the 447 bonds which are ,pa.rticular'ly described4n the complaint. At tl. meeting of 'the'directors of the defel'.ldant,'heldioD Janulity26, 1874, the following,l'e't'l01uti6ns were , ,, ,: ,,', ,J ' j . ' . Ii una.nimously'attoptoo: ·. ,', "ed',' 'tbat'.;.; hen 'the said ' bonds ...e' delivered to this eOlnpany by the said the' Mis$.issippi Ceritral Railroad Qompany, th\" corporate seal of this com.: ' pany;.attes.ted: b;y' tbesignatul'es of t1,la president,andstlcreLary ,be affixed to a.,

:" " Benj. 11') B'l"i.iww, Anthony ,lliggim,ahd ,David' Wilcox, for plaintiff. Bang8' & rStdlsO'h,' for defendant. "

ROGERS L. &: M. WORKS' '11. SOUTHERN RAILROAD ASS'N.279 '

:guaranty 'to:be indorsed on each of-the said five thousand bonds in the following form: · For valuable consideration the Railroad Association .guarantiel;l to the holder :the ,within .bond the punctu!¥ payment of the pdn,; cipal and interest thereof when all.d as the same shall faU due. according to tlie terms promises of. the said tiond. WitnesstM corporate seal of the'sa:id company;'this 20th day' of Janu/iry, A. D. 1874:' -, , . "Resolved. that the treasurer of this company be authorized to appropriate -such number as may be required of the said bonds wIDchsball have been take,n by this company on account of advances made tothe Mississippi Central Railroad Company, to the purchase of from twenty-eight to thirty thousand (28,OOOtp, 3,q,OOO) shares of J.ackson & Great . RaI1rOad. Company; prov.Ided, that m makulg the saId purchase the bonds, with the coupon of IM74 detached, be taken at 'par. and the price of the sbares hot to exceed seventy-five donars per share for the shares of one hundted dollars each." Said guaranty was thereupon indorsed upon aachof said $5,000 bonds: ,At ameeting of the, stockholders of the defendant, on June 22, 1874, atwl>.ich'meeting 2('),000 shares into which stock' oUhe gefendant whe divided was represented, the proposed'consolidation of the Mississippi Company with the New Orleans COIupauy under the name of the New Orleans, St. Louis & Chicago Railroad' pany,hereinafter caIlEidtb,e"St Louis Company," was approved; and'ft was voted that the executive' officers of the'· defendant sell to said lastmentioned railroad company their interest in. the lease of the Mississippi CoIDpany"upOn such terms· and on such comiitions as may be agreed upon. The following and adoptedl " . is advisable torafse the sum'of eight hundred lars to pay the floating inc1eptooness of this colppa:ny, and it is believed that the object can be attained'. most advantageously for the interests of holders of tbis company by offering to eacb one the optionor privilege of purcertain of the assets of this company at a .price sufficient to secure:the reqUired sum: Therefore, be it stockholderof this company whoshall,qefore the 1st day of July next. pay to the treasurer of this company. either cash Qr. in the notes or obligations of this, company, a sum equal to forty per of the par value of the stock of this company standing in the name of such stockholder on the first day of July, 1874, shall be entitled to receive mortgage'bonds of the Mississippi Central Raihroad,Companyof the issue known as the ·Consolidated Mortgage Gold Bonds,'to.an amount equal at the par tllereof to the said also mortgage 1;>onds of the, said Mississippi Central Railroad Company o,f the late issue,\nown as , Income: and; Equ,ipment,Bonds,' to amount equal at the par thereof to the amount ,at par of the stock of this company standing In the naine of such stockholder on the books of thi!l company at the closing afthe books on the first day of July, A. D. 1874. Second. That the secretary be directed to forward a copy' of the above,resolUtion to each of the ljtockholders ()f this com'

The plaintiff was the owner of ,2,767 sharesofthe capital stock of the defendant, which stood in the name of Jacob S. Rogers, and Jacob, S. Rogers, trustee. Mr. Rogers was president of the plaintiff, and was .one of the directors of the defendant, and was present at the directors'meetiog of January 26, 1874, atld'at the srodkholders'meeting of June 22, 1874. 'After June 22,:1'874,the defendll:nit"for value, trllnsferred and

. 280

FEDERAL, REPORTER.

delivered 220 of said income bonds, guarantied as aforesaid\ to the St. Louis Company, and said company thereafter, for value, transferred and delivereq same 220 bonds to the plaintiff, which still holds and owns the sa,me. O,ne hUD,dred and C)( said' bonds were numbered 4,361 to 4,500, to each of which said-nunibel'ed bonds were ll:nd are attached 18 coupons, beginning with coupon No: 5, falling due January 1,1876, and including; coupon No. 22, falling due December 1, 1884, the date of tlJt\ maturitY Of the bonds. Tlie residue of the said 220 bonds were nUmbered4,501 t04,580.. To each6fsaid last-mentioned and numbered bonds were and.are attached 19 coup?n'!l, begipl1ing with coupon No.4, falling J,1875, coupon' No... 22, falling due as aforesaid. Pursuant to the saidres1i>lutions of June 22, 1874, and after said dare, the said Rogers, acting in behalf of the plaintiff, elected to pay the defendantrtOper cent. assessmentppon thewhole or a portion of the'slJ.me by surrendering to the defend- ' its stock; $90,680, which given by the defendant to the ant its plaintiff forlocQmotivef:!, bought by. the.defendant, and the plaintiff there:upon received from the bon.dsofthe Mississippi am9unt of $90,OQO,ltnd income and equipment .bonds cOll)papy;to the amount bE;'ing bonds numbered q,501 to inclusive,. allq .$700 .of,.bond ,No. 4,l)98. The additional $800 of the .latt,er bond was aqqu;ireq by a purchase for cash of scrip to and are attached 20 coupons, that <lue June 1, 1$75,' and including beginning ,withcouppn No.. 2,2, falling due December I, 1884. The plaintiff still owns bonds, . To eachW, said bonds guaranty was tached, :22, 1874, and:sul;>sequently, the. cPnsolidated bonds. of the Mississippi Company ,had a market. value, but as they were not listed upon the New York Stock]j}xchange, their value is not now easily ascertained ·. ,Testimony was given that a quantity of these bonds was sold In 1874, at 8iH per cent.:to anotherrailroad company, which was assisting au e,xtension of the defendant's railroad system for the purp.ose of enabling its own,tailtoad to reacl}..New Orleans. ,This cannot be considered as evidence of the market value of said bonds. I fiud that the bonds had a substantial market value, but I am unable to. ascertain the price at which they c()uld haJJe been sold for cash. I find that. in .th,e 5<'\l\3.of the inCOme bonds to the stockholders the guaranty of the defendant\yas not a portiol) q(or an incident of the property which was sold, and: tn ahd by the sale it Wl¥! not understood .that the. purchasing stockholders were to receive and have the benefit allQ. the promise of ·the guaranty... And further find that in the 'sale of the income bonds to· the St. Louis Railroad Company the guaranty was an incident of and a for the difvaluable patt of the property Which Wl!B sol(i.The Jerence in the findings with respect.to the two !lets of bonds are given ' ,.' ' . .'. ' hereafter. The conclusions of fact and of.1a.w upon the foregoing findings of fact are aE follows: The defendant corporation, which has power by its char.ter to issue its own bonds, has the power to' guaranty the bonds of an...

ROGERS L. & Y. WORKS V. SOUTHERN RAILROAD ASS'N.

other railroad corporation, which it receives in payment of the debt to it of said last-named railroad corporation, and which bonds it sells for value, or transfers in payment of its own debts; said guaranty being given as the means of augmenting the credit of said bonds, and enabling the defendant corporation to obtain an adequate price or equivalent for them. Railroad CO. V. Haward, 7 Wall. 392; Arnot v. Railway Co., 67 N. Y. 315. The guaranty was originally placed upon the bonds for the purpose of augmenting their value, and enabling some of them to be used towards the purchase of the stock of the New Orleans Railroad. It is not important whether, when the guaranty was actually written upon the bonds, a consideration had been received for the promise,. because whenever the bonds were thereafter sold to a bonafide purchaser, for value, or transferred in payment of the debts of the guarantor, t11e, defendant had the legal right to guaranty their payment; and the bonds being delivered with the upon them, and no ,evidence existing, . either in the nature of-the transaction or from. any other quarter, that the guaranty did not pass with the bonds as apart of the purchase, it is to be treated as if it was written at the time of the sale. Arnot v. way Co., BUpra. It follows that the defendant is liable upon its anty olthe 220 bonds which were sold or transferred for value to the St. Company, and were afterwards transferred, for value, to the plaiptiff. There was no infirmity in the title of the St. LouisC0mpany to the bonds,and no' lack of power in the defendant to give the guaranty. The same result would follow in respect to the 227 bonds which were -delivered to the plaintiff, if the guaranty did in fact pass with the bpmjs as a part of the purchase. If, in the absence of fraud, the defendant sold and the plaintiff bought a guarantied bond, the defendant would be liable upon the guaranfY,although it had made an improvident bargain. The question of fact is whether the guaranty was sold with the bond, and arises between the purchasing stockholder and the selling -corporation. No question of law exists as to the rights of a purchaser from the stockholder. The defendant ib. pecuniary straits, and owed a floating debt of $800,000,. It had as or among its assets consolidated bonds of the Mississippi Coulpany, which had a substantial value, and were worth, haps, 50 cents on the doUar; and had also the income bonds of said -compatly, which were worth very little without the guaranty of the defendant. To its stockholders, who would advance a SUlll equal to 40 per cent. of the par of their stock, it offered to transfer consolidated bonds -equal in. amount to the cash payment, and income bonds equal to the par of the stock. Thus, in addition to the consolidated bonds, the stockholders would receive income hands of twice and one-half the amount of his cash payment, and, if the guaranty passed with the bonds,the defendant obliged itself, in order to pay a floating debt of $800,000, to pay $2,000,000 at 7 per cent. interest. Instead of owing $800,000, it -owed $2,000,000, and had parted also with a valuable portion .ofits as.sets. The that the. transfer of the guarantied bonds was a. gift to the stockholders is unworthy of credit. The trlUis8ction was a sale,

"

.I

.'

with' bMvitl10ilLt the guararity; ,imdtlie; :factthat not erased:when the-bonds were delivered raises a strong presumption that it wl1sintehdedto be ann6xed, and to be a continuing obligation of the seller. ,<, Thig, presumption is attacked by the inherent improbabilities of suehfi'ttansaction, and by the fact that the resolutiouswhichauthorized, the sale' were silent t& the guaranty,a circumstance which t1ffirmative evidenceontthesubject. It is not credible that the defelldiant 'entered into the sale with the belief that it was undertakingtodeliver guarantied bonds. Such a transaction would be too ptovident, and too nearly akin, to fraud upon any non-assenting stockholder, ito OOmrriend itself:tothejudgment of the stockholders, and strong proofisillElkluired to com,pela finding tQat they werewillilag to imperil the· existence'or,the companyby" such ll. ruinous agreement. , Nptwitb" standing :the':fact that guaranty Wf!,S not' erased, and: was delivered withthe.bonds, lam not able to ,believe that the Contract ofsale, as pe-' tweeo'tli$'istookholders and· the cOriporation, was,that of a guarantie\l bond, 'but '1'ltMr that tije' existence :ofthe guaranty was deemed to con,-: fer' r:ioPigl1tsl upon the stclckholder:against the company., ' I cannot fipd that a wasmll.de fortheoatensible purpose or. paying. a debt :to:increase it to $2,000,000, and bound the seller to the payment of the laUenum. ' JUdgtttEmt 'ordered to be' entered for the plaintiff for the amount due upon 220 bonds "numbel!ed from 4,361 to 4 j 5S0, jnclusive, aQd, upon the :Unpaid coupons attached !thereto, and the interest thereon, and the interestJ'flipon the prineipal sum after the maturity of said bonds.
(';';f ,; : (";

. PEARcE tI. H@:PHREYS

E ·..D. Michigan.

et al.

March 12, 1888.),

AT CRl>ss'UrGS.

I>

driving a truck along a private way t'll.r<111gh which .wills lcommonly used by teams in going to, and from lin elevato,r, alid "which crosse411t large number of,l,'aHwaytracks. Hlsview of the main posed by pas,s,enger trains. by a lineoffrei.ghtcars stall;dihg upon the .next track, whIch' had'been Opened at tbecrossmg of thepm'ate way toform'll' 'passage for teams '\0.cr088 the tracltB.. Plaintiff was abour crpSS tl\e main track. He dil! llot StOPr but listened for the ll:pproach of trams. by.an engin'e wh'i(!h Hearing no signal, he attempted to cross, but Wl!:S had just leftthet>assengetlltation,landwas proceeding at a speed.of 10 or· 12 , miles anh.Oll:r.i ,11'bere was evidence tbat there was no lli&"nal given of its; proach. lHela, the ql).estionrespectively of the ne¥hgence of tbej>lain. ,plf'and was properly submitted to the jury. . " ,,', by
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lIM, Durbinv·.Na.vigatlOn CP··

IOn the gehElrai:sUbjeCt of the approaching.' a'railrbad cro8sin.·g '" (Or,) 17 Pac, Rep. 5, and note. As to the d)l.ty of,l1Iofi.:. road Co.V. SChuster, (Ky.) 7 S. W. Rep. 874, 'aDll 'note. ., ."" ,.. ,. ' . ... . " ,