Melendy v. Keen

• Decision Date: 30 September 1878
• Citation: 89 Ill. 395,1878 WL 10045
• Parties: JOHN A. MELENDY et al.v.CHARLES B. KEEN.
• Court: Illinois Supreme Court

89 Ill. 395

1878 WL 10045 (Ill.)

JOHN A. MELENDY et al.

v.CHARLES B. KEEN.

Supreme Court of Illinois.

September Term, 1878.

APPEAL from the Circuit Court of Carroll county; the Hon. W. W. HEATON, Judge, presiding.

This bill was to foreclose a mortgage made by John A. Melendy, his wife joining in the execution, to the Racine and Mississippi Railroad Company. It embraces two hundred and sixty-four acres of farm lands by appropriate description, and was given to secure a note or bond signed by the mortgagor, for the sum of $4,000, bearing date March 18, 1856, payable to the mortgagee by its corporate name, at five years from the 10th day of May, 1856, with interest at the rate of ten per cent per annum, payable annually on the 10th day of May in each year, at the office of the company in the city of Racine.

As a part of the same transaction, and concurrently executed, the railroad company, by its proper and duly authorized agent, made and delivered to the mortgagor a contract, as follows:

“Whereas, John A. Melendy has executed a note and mortgage in favor of the Racine and Mississippi Railroad Company, bearing date on the 18th day of March, 1856, payable in five years from the 10th day of May, 1856, for the sum of $4,000, with interest annually at the rate of ten per cent per annum from and after the said 10th day of May, 1856; and whereas the said note and mortgage have been received in payment of forty shares of capital stock in said company: Now, therefore, in consideration of the relinquishment and assignment by the said John A. Melendy to the said company of so much of the dividends on said stock which he may become entitled to, as shall be sufficient to pay the interest on said note, the said company agree not to demand said interest from him, and in case said note and mortgage shall be negotiated by said company, then said company agree to save him harmless from said interest; and the said John A. Melendy hereby assigns to said company so much of any dividends to which he may become entitled on said shares as shall be sufficient to pay off said interest, and agrees to pay said principal sum when the same shall become due. And the said company agree to pay all surplus dividends over and above said ten per cent to the said John A. Melendy, and to pay the whole dividends arising on said stock, after said term of five years, to the said John A. Melendy.”

The bond of the railroad company, to which the note and mortgage were attached before it was transferred to the firm of Keen & Taylor, of which firm complainant was a member, is dated at the office of the company, in the State of Wisconsin, on the 13th day of May, 1856, is payable at the office of the company in the city of New York, and is as follows:

“Know all men, by these presents, that the Racine and Mississippi Railroad Company is justly indebted and promises to pay to ____, or bearer, $4,000 on the 10th day of May, 1861, at their office in the city of New York, together with interest thereon, after the 10th day of May, at the rate of ten per cent per annum, payable semi-annually on each 10th day of November and May, upon the presentation and surrender of the annexed coupons at the said office, to the payment whereof the said company hereby bind themselves firmly by these presents; and for the better security of each payment being made to the holder thereof, the said company have assigned and transferred, and by these presents do assign and transfer to the said holder of this bond, a certain note for $4,000, executed by John A. Melendy, together with a mortgage given collateral to and for the purpose of securing the payment of the same, dated on the 18th day of March, A. D. 1856, payable four years from the 10th day of May, with interest at the rate of ten per cent per annum, which said note and mortgage are hereto appended, and are transferable in connection with this bond, and not otherwise, to any parties or purchasers whomsoever; and the said company do hereby authorize and empower the holder of this bond, at any time, in case said company shall fail to perform any of the foregoing stipulations, by neglecting to pay either principal or interest on this bond when the same shall become due, to proceed and foreclose the said mortgage, or take such other legal remedy on said note and mortgage against said mortgagor or against this company on this present bond, or on both, as shall seem proper and expedient to said holder thereof.”

The bill of sale to Keen & Taylor of this note and mortgage with other securities, is without date, but the proof is it was delivered to them on the 30th day of December, 1861, is signed by the Racine and Mississippi Railroad Company, by H. S. Durand, and is as follows:

“Bought of Racine and Mississippi Railroad Company $16,300 farm mortgages, $5,000. Received payment in full by the surrender of said railroad company's note, August 8, 1857, for $5,000.” The note surrendered purports to be the note of the railroad company to H. S. Durand, president, payable at the office of Keen & Taylor forty-five days after date, and is indorsed by H. S. Durand, president, and John Rinewalt.

Mr. L. E. DEWOLF, and Mr. J. H. KNOWLTON, for the appellants.

Mr. C. B. SMITH, for the appellee.

Mr. JUSTICE SCOTT delivered the opinion of the Court:

Although this record has been somewhat confused by the introduction of depositions, taken with a view to be used primarily in other analogous cases, and of much irrelevant matter, the controlling facts, when ascertained, are neither numerous nor complicated. It is the usual bill to foreclose a mortgage.

Among the defenses insisted upon, is first, that the note secured by the mortgage was obtained for stock in the Racine and Mississippi Railroad Company by means of false and fraudulent statements as to the financial affairs of the company, and of its ability to complete the whole line of the projected road, in consequence of which the stock was and is valueless, and hence there was a total failure of the consideration of the note; second, before the bill was filed, the mortgage was released by the said railroad company, and since the release was placed on record in the county where the lands are situated, and while the title appeared of record to be unincumbered, the mortgaged property passed into the hands of a subsequent purchaser for value; and third, the note and mortgage were never, in fact, assigned or indorsed to complainant.

On the first branch of the defense the testimony found in the record is quite voluminous and in some particulars conflicting, but as to many of the important facts, the proof is so conclusive they are not controverted. Prior to the transpiring of the events out of which this litigation arose, there existed under the laws of the State of Wisconsin, the Racine, Janesville and Mississippi Railroad Company, with power to construct a railroad from Racine to the Mississippi river, and by a subsequent act the company was authorized to construct a branch of its road to Beloit, on the line between that State and Illinois. The company had so far completed its road from Racine to Delavan, a distance of forty-six miles, as to have cars, both passenger and freight, running over it, and had done considerable grading between that point and Beloit, when it was determined by the management to extend its line of road through Illinois to Savannah on the Mississippi river. Under enabling acts passed by the legislatures of the two States, the Wisconsin railroad company was consolidated with two railroad companies existing under the laws of Illinois, with a view to construct a continuous line of road from Racine, on Lake Michigan, to Savannah, on the Mississippi river. The names of the companies in both States, under acts passed for that purpose, were changed to the Racine and Mississippi Railroad Company, and the consolidated companies were thereafter under the management of the same directory. A full and accurate account of the consolidation of the several companies into the Racine and Mississippi Railroad Company, and of the enabling acts under which the consolidation was effected, is given in the opinion in Racine and Mississippi Railroad Co. v. Farmers' Loan and Trust Co. 49 Ill. 331.

It does not appear that the Wisconsin railroad company ever had any capital actually subscribed and paid in, but that portion of the work of constructing its road from Racine to Beloit, that was done, was by means raised by selling, hypothecating and pledging, in every possible way, municipal bonds, that had been voted for stock in the company, and “farm mortgages” given to...