Calhoun v. Delhi & M.R. Co.

• Decision Date: 15 April 1890
• Parties: CALHOUN et al. v. DELHI & M. R. CO.
• Court: New York Court of Appeals Court of Appeals

121 N.Y. 69

24 N.E. 27

CALHOUN et al.

v.DELHI & M. R. CO.^*1

Court of Appeals of New York.

April 15, 1890.

Appeal from supreme court, general term, fourth department.

I. H. Maynard, for appellants.

John B. Gleason, for respondents.

ANDREWS, J.

This action was commenced January 6, 1882, by the plaintiffs, certain tax-payers of the town of Andes, in the county of Delaware, in behalf of themselves and all other tax-payers in said town, against the Delhi & Middletown Railroad Company, the supervisor of said town, and certain other defendants, holders of bonds to the amount of about $50,000, dated September 1, 1871, part of $98,000 of bonds, with interest coupons attached, purporting to have been issued by commissioners in behalf of said town, under and in pursuance of chapter 907 of the Laws of 1869, in aid of the construction of the Delhi & Middletown Railroad. The complaint sets forth that the bonds were issued without authority, and were void, for the reason, among others, that the proper consents required by the act of 1869 were not obtained, and demanded equitable relief- First, that the defendant Ballantine, supervisor of said town, be restrained and enjoined from paying the interest falling due on such bonds March 1 and September 1, 1882, out of the sum of $6,650 in his hands, levied and collected for the payment of such in terest; and, second, that the bonds held by the individual defendants be decreed to be delivered up and canceled.

The question of the validity of the bonds of the town of Andes, issued under the act of 1869, was presented to and adjudicated by this court in the case of Craig v. Town of Andes, 93 N. Y. 405. It was there decided, for reasons disclosed in the prevailing opinion, that the bonds were void. That action was brought after the commencement of the present one, to recover interest on certain of the bonds which fell due March 1, 1882. It now appears from the evidence in this action that the Craig suit was brought at the instance of Ballantine, the supervisor of the town, and the trial judge found ‘that the coupons on which the action was brought were paid for out of the moneys of said town, and said action was prosecuted by attorneys paid by said town, and was defended by attorneys paid by said town, said town paying all the expenses thereof, and the suit was brought any defended for the purpose of procuring the bonds of said town to be declared invalid.’ We fully assent to the claim of the counsel for the bondholders, that an adjudication obtained under such circumstances ought not to stand in the way of a re-examination by the court of the grounds upon which it proceeded; and if we were now satisfied either that upon the facts presented in that case the question of law was erroneously decided, or that facts not disclosed on the trial of the Craig Case, but now brought out, would, if then disclosed, have led to a different result, the circumstances stated would emphasize the duty of the court to correct its errors, or to conform its judgment in the present case to the new circumstances. It is claimed that material facts bearing upon the validity of the bonds, not shown on the trial of the Craig Case, were proved on the trial of the present one, prominent among which is the fact which now appears, that the railroad in aid of which the bonds were issued had been in fact legally located on the identical route specified in the conditional consents, prior to May 6, 1871, the date of the presentation of the petition and consents to the county judge. But we deem it unnecessary to determine whether the new facts presented affect the principle of our former decision, for the reason that we think the judgment below dismissing the complaint in this action was properly rendered, assuming the invalidity of the bonds.

It will be convenient to consider separately the two purposes of this action, viz., the surrender and cancellation of the bonds held by the individual defendants, and the separate and distinct relief by injunction to prevent the defendant Ballantine from applying the money in his hands to the payment of interest. The jurisdiction of a court of equity to compel the surrender and cancellation of written instruments obtained by fraud, or which being void for any reason may, if outstanding, subject the plaintiff to loss or injury, is very ancient, and has been frequently exercised. The plaintiff, seeking this relief, invokes the equitable powers of the court, and the court grants or refuses it, in the exercise of a sound discretion, according to the circumstances of the particular case. The granting of this relief cannot be claimed as a matter of ‘absolute right ex debito justitiae, such as a party has to recover an amount due on a contract or for damages for a tort.’ The existence of jurisdiction, and the fact that plaintiff makes out that the instrument of which he seeks the surrender and cancellation is void, are not conclusive of his right to a final decree in his favor. The court may nevertheless refuse to exercise the jurisdiction, and leave the party to his defense at law, when the instrument is sought to be enforced against him. But, in entertaining or declining jurisdiction, the court does not act capriciously, but is guided by principles which have gradually been evolved in the course of adjudication. It is apart from our present purpose to arrange or classify the cases upon the subject. The general grounds of jurisdiction, and the circumstances which justify equitable interference, or, on the other hand, the denial of equitable relief, are set forth in the textbooks, and illustrated by decided cases. We refer to a few of the decisions in this court upon the subject. Heywood v. City of Buffalo, 14 N. Y. 540;Town of Venice v. Woodruff, 62 N. Y. 462;Town of Springport v. Bank, 75 N. Y. 397.

The facts in the present case present several elements which have entered into the consideration of the court in granting relief for the cancellation of written instruments. The bonds of the town of Andes are, as we have assumed, void, and since the commencement of this action they have been so adjudicated, but the adjudication is an estoppel only as between the parties to the action in which it was made. The other bondholders are not concluded, and may contest over again the question of the validity of the bonds. There exists, also, the further element that the bonds are not void on their face, and that, in a suit brought thereon, the proof of the adjudication of the county judge that the requisite consents had been obtained would presumptively establish performance of the condition as to consents in the bonding act, and cast upon the town the onus of disproving it, and showing that in fact the requisite consents had not been given. Craig v. Town of Andes, 93 N. Y. 410. It also appears by the record that the bonds are held by numerous parties, each of whom might bring an action at law to enforce them, unless prevented by the equitable interposition of the court for their cancellation. In the case of the Town of Springport v. Bank, 75 N. Y. 397, 84 N. Y. 403, the court sustained an action for the cancellation of town bonds, upon facts substantially similar to those presented in this case, with the important exception, however, that there the town had acted promptly in repudiating the bonds, and in seeking to review the proceedings under which the right to issue them was claimed. In that case the adjudication of the assessor was made March 13, 1871. The town procured a writ of certiorari to review and set aside the bonding proceedings, April 13, 1871, and they were set aside in that proceeding by the judgment of this court in June, 1873. The defendants purchased the bonds in September, 1871, pending the litigation on the certiorari, and in January, 1875, the suit for cancellation was commenced. The town had paid no interest on the bonds, and refused in any way to recognize their validity. This court also, in the case of Metzger v. Railroad Co., 79 N. Y. 171, affirmed a judgment canceling town bonds issued in aid of the Attica & Arcade Railroad Company, on the ground that they were issued without authority. The bonds in that case were delivered by town commissioners to the railroad company in exchange for its stock, March 21, 1874. The suit for cancellation was commenced in January, 1876, less than two years thereafter. The commissioners were joined with the railroad company as defendants in the action, and the complaint alleged collusion between the defendants to impose the bonds upon the town. The bonds had not been transferred by the company, and the town had paid no interest. The case of Town of Mentz v. Cook, 108 N. Y. 504, 15 N. E. Rep. 541, sustained a decision of the special term of the supreme court decreeing the cancellation of town bonds, on the ground of a defect in the petition by which the proceedings to bond the town were initiated. The road in aid of which the bonds issued had never been constructed, and, after paying interest on the bonds for a single year, the town repudiated its liability, and commenced an action for their cancellation.

The present case, for the first time in the history of the litigations growing out of the town bonding acts in aid of railroads in this state, presents the question whether the equitable remedy for cancellation may be refused by reason of long delay and acquiescence on the part of the town and its tax-payers, accompanied meanwhile by frequent acts recognizing the validity of the obligations of which cancellation is sought, although the delay in bringing the action has not continued for the full statutory period of limitation of equitable actions. It is important to state the material facts bearing upon the question. The adjudication of the county judge that the persons who signed the petition in the bonding proceedings constituted a majority of the tax-payers of the town of Andes, in number and amount of taxable...