State of Alabama v. Burr

Decision Date16 November 1885
Citation115 U.S. 413,29 L.Ed. 435,6 S.Ct. 81
PartiesSTATE OF ALABAMA v. BURR and others. Filed
CourtU.S. Supreme Court

This is a suit at law, brought in this court by the state of Alabama against Isaac T. Burr, Samuel A. Carlton, John De Merritt, citizens of Massachusetts, John C. Stanton, a citizen of New York, and Daniel N. Stanton, a citizen of New Jersey. The declaration states, in substance, that under the operation of certain statutes of Alabama the governor was authorized and required to indorse, on the part of the state, the first mortgage bonds of the Alabama & Chattanooga Railroad Company, a corporation having power to construct a railroad from Meridian, in the state of Mississippi, through the states of Alabama and Georgia, to Chattanooga, in the state of Tennessee, a distance of 295 miles, to the extent of $16,000 per mile on the whole length of its road, as fast as sections of 20 continuous miles each were 'finished, completed, and equipped.' The bonds, when issued and indorsed, were to have 'priority in favor of the state over any and all other liens whatever.' Sections 5 and 6 of an act of February 19, 1867, on which the liability of the defendants of a large extent depends, are as follows:

'Sec. 5. Be it further enacted, that the bonds before specified shall not be used by said company for any other purpose than the construction and equipment of said road; and the governor shall not indorse the same unless on the affidavit of the president of said company, and a resolution of a majority of its directory for the time being, that said bonds shall not be used for any other purpose than the construction and equipment of said road, or sold or disposed of for a less sum than ninety cents in the dollar; nor shall said bonds be indorsed until the president and chief engineer of said company shall, upon oath, show that the conditions of this act have been complied with in all respects.

'Sec. 6. Be it further enacted, that it shall be the duty of the governor, from time to time, when there shall be reliable information given to him that any railroad company shall have fraudulently obtained the indorsement of its bonds by the governor on the part of the state, or shall have obtained the indorsement contrary to the provisions of this act, or shall have sold or disposed of the bonds indorsed by the governor for a less sum than ninety cents in the dollar, he shall notify the attorney general of the state, whose duty it shall be forthwith to institute, in the name of the state, a suit in the circuit or chancery court of the county of the place of business of the company, setting forth the facts; and when the fact shall satisfactorily appear to the court that the indorsement of any of said bonds shall have been fraudulently obtained, or obtained contrary to the true intent, meaning, and provisions of this act, or that said bonds shall have been sold or disposed of for a less sum than ninety cents in the dollar, then, and in such case, the court shall order, adjudge, and decree that said road lying in the state, with all the property and assets of said company, or a sufficiency thereof, shall be sold, and the proceeds thereof shall be paid into the treasury of the state; and it shall be the duty of the comptroller immediately to invest the same in state bonds, or the bonds indorsed by the governor under the provisions of this act, creating a sinking fund as provided for in the eleventh section of this act; and said company shall forfeit all rights and privileges under the provisions of this act. And the stockholders thereof shall be individually liable for the payment of the bonds, the indorsement of which was so fraudulently obtained by such company, or which were sold or disposed of for less than ninety cents in the dollar, and for all other losses that may fall upon the state in consequence of the commission of any other fraud by such company, excepting such stockholders as may show to the said court that they were ignorant of or opposed the perpetration of such fraud by the company.'

By another statute passed February 11, 1870, the governor was authorized to issue state bonds to the amount of $2,000,000, and exchange them with the same company for an equal amount of its own bonds, secured by a first mortgage on lands granted to the company by the United States, and certain other specified property, including, if the governor should deem it necessary, a second mortgage on the railroad. The bonds were only to be issued in such sums as it should be shown by sufficient evidence had been expended by the company in the construction and equipment of its road, 'in addition to and besides the proceeds of the bonds indorsed by the state which the said railroad company shall have received under the laws of the said state now in force.' The act also provided that these bonds should not be sold at less than 90 cents on the dollar, and 'that the directors or other officers and incorporators and stockholders of said railroad company, who shall knowingly violate, or permit the violation without objection, any provision of this act, or of the act under which said company is now receiving the indorsement of the state upon its bonds of $16,000 per mile, shall be held personally liable to the state for any loss incurred thereby.' The declaration, after setting forth the various statutes relied on, proceeds as follows:

'The defendants were at the time last mentioned, and from thence continuously, until and at and after the time of the occurrence of the several and respective wrongs and injuries and losses to the plaintiff hereinafter stated, the majority and controlling incorporators, officers, directors, and stockholders, as well as the actual managers and controllers, of the said Alabama & Chattanooga Railroad Company;' and, after stating that the company issued $1,250,000 of its first mortgage bonds in excess of that authorized by the statutes, avers that such overissue was made 'with the intent fraudulently to procure the indorsement of each of its said bonds by the governor of plaintiff as if the indorsement of each of them by said governor was authorized by said acts, and with intent to deceive the governor of the plaintiff, and to defraud the plaintiff to the extent of an amount equal to so many of said bonds and indorsements thereof as were not authorized by said acts to be indorsed by the governor of plaintiff; and said last-named company, with such fraudulent intent, did, by false and fraudulent representations and pretenses, some of which were to the effect that said company was presenting to the governor of plaintiff, for indorsement by him, only so many of its bonds as said acts authorized him to indorse, and was claiming of him indorsement of only so many of its bonds as said acts authorized him to indorse, fraudulently procure from said governor his indorsement of each and all of its bonds issued as aforesaid, and the redelivery to that company of all its said bonds indorsed as aforesaid. In procuring said indorsement by said governor of Alabama of each and of all the said bonds of said last-mentioned company, that company made to said governor the following, among other, false and fraudulent pretenses: That this last-mentioned company, at the time it applied for and procured said indorsements, had twenty continuous miles of its railroad finished, equipped, and completed, outside of the state of Alabama, and in the state of Mississippi, and extending in a north-easterly direction towards Alabama; that said last-mentioned company, at the time it applied for and procured said indorsements, had twenty continuous miles of its railroad finished, equipped, and completed from Chattanooga, in the state of Tennessee, in a south-westerly direction towards Alabama, but outside of Alabama. The governor of plaintiff was induced to make said indorsements by believing and acting upon said several false and fraudulent representations and pretenses; and otherwise would not have made any of said indorsements.

'The said representations and pretenses were false in the following, among other, respects and particulars: First. That said twenty miles of road, situate in the state of Mississippi, for which the first indorsement was procured, had not been finished and completed by said company, but was an old road purchased by said company, and which had been built several years prior to the passage of said acts by said Northeast & Southwest Railroad Company. Second. That said road was not equipped. Third. That said company had not finished, completed, and equipped twenty continuous miles of said road from said city of Chattanooga, extending towards the state of Alabama, for which it procured the indorsement by the said state of the second batch of three hundred and twenty of said bonds; but, on the contrary, said company estimated, as a part of said twenty miles, a part, to-wit, five miles, of the road of another corporation, situated in the state of Tennessee, which was used by it for the running of its train, under an agreement with said other corporation, and which said road has been continuously eversince, and is still, the property of said other corporation, and for the use of which the said Alabama & Chattanooga Railroad Company was then paying, and continued to pay so long as it controlled and managed its own road, a large rental, amounting to many thousand dollars, which was paid out of the proceeds of the sale of said indorsed bonds. Fourth. That said twenty miles of road claimed to have been finished and completed by said Alabama & Chattanooga Railroad Company, from said city of Chattanooga, as aforesaid, at the time it procured said indorsements, had not at that time been equipped.'

It is then averred that the two millions of dollars of state bonds were issued to the company under the act of 1870, and that, after this was done, and on or about September 15, 1871, a petition in bankruptcy was filed, under which the company was...

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