Augusta, T. & G.R. Co. v. Kittel

• Decision Date: 23 June 1892
• Docket Number: 41.
• Citation: 52 F. 63
• Parties: AUGUSTA, T. & G.R. CO. et al. v. KITTEL.
• Court: U.S. Court of Appeals — Fifth Circuit

52 F. 63

AUGUSTA, T. & G.R. CO. et al. v. KITTEL.

No. 41.

United States Court of Appeals, Fifth Circuit.

June 23, 1892

J. B C. Drew, for appellant.

H Bisbee, for appellee.

Before pardee and McCORMICK, Circuit Judges, and LOCKE, District judge.

PARDEE Circuit Judge.

With the appellant were joined as defendants, in the court below the trustees of the internal improvement fund of the state of Florida, and William Clark. As these last-named defendants were not substantially affected by the decree of the court below, they did not join in the appeal. Severance being had as to defendant Clark, the railroad company alone appealed.

The Augusta, Tallahassee & Gulf Railroad Company was chartered by the legislature of the state of Florida to construct a railroad from the city of Carrabelle, on the Gulf of Mexico, to the Georgia state line, by way of Tallahassee, and thence onwards to the city of Augusta, Ga., under a charter obtained from the last-mentioned state,-- a distance of about 300 miles. The legislature of the state of Florida granted the railroad company 15,000 acres of land per mile, of the lands donated to the state under the swamp and overflowed lands act, enacted by congress in 1850. Prior to the matters giving rise to the present suit, the company had constructed and equipped 11 1/2 miles of its line, from the gulf to a point on the west bank of the Ocklocknee river, for which they had received, under the land grant aforesaid, a certificate (No. 13,909) entitling the company to 108,971 acres of swamp and overflowed lands. Under the charter of the company, the board of directors was to be composed of nine stockholders, each the bona fide owner of not less than five shares of the stock of the company. On May 24, 1889, there seemed to be but seven directors,-- Henry A. Blake, R. B. Symington, Charles M. Zeh, William Clark, W. Campbell Clark, Henry Gamble, and Robert Cumming. Of these seven directors, Blake was president; William Clark, the purported capitalist of the company; and the other five, apparently, representatives of William Clark's interest,--all but Dr. Zeh being his clerks and partners, and Dr. Zeh, his family physician. Such of them as were examined on the hearing of this case showed by their testimony that they were, in the main, perfunctory directors, following the lead and wishes of William Clark.

In this state of the directory, on May 24, 1889, the record shows that a stockholders' meeting and a meeting of the board of directors were held. At the stockholders' meeting, so far as the evidence in this case discloses, the following proceedings were had:

'A meeting of the stockholders of the Augusta, Tallahassee & Gulf Railroad was held at No. 400 Broadway, this day, at 3 o'clock P.M., pursuant to adjournment; a majority of all the stockholders being present. First, referring to the bonding of some of the property of the railroad company, the following resolution was presented and unanimously adopted, to wit: 'And, for the purposes aforesaid, the board of directors are also empowered to dispose of and sell all the said bonds, or any part of them, and also to dispose of and sell any of the capital stock of this company not already issued and subscribed for, in such manner as the board may deem to be expedient for the best interests of the company; or, in case the board should deem it expedient for the best interests of the company to sell, pledge, mortgage, or otherwise use the whole or any part of the lands now owned or coming unto this company from and under the said land grant from the state of Florida, or in any other manner than as heretofore authorized, either permanently or temporarily, they are empowered so to do. Resolved, that resolutions or parts of resolutions inconsistent herewith are hereby rescinded and annulled."

The board of directors, at their meeting, (whether one continuous meeting or in adjourned sessions does not appear,) resolved as follows:

'New York, May 24, 1889, a meeting of the board of directors of the Augusta, Tallahassee & Gulf Railroad Company was held at No. 400 Broadway, this day, at 4 o'clock P.M., pursuant to adjournment; a majority of the board being present. First, reciting and providing for carrying out provisions in the resolutions of the meeting of the stockholders of the same date, it is further provided, in the event, however, that the president should at any time deem it expedient to negotiate, sell, pledge, mortgage, or otherwise use the whole or any part of the lands now owned or coming to this company from and under the before-mentioned land grant from the state of Florida, and in any other manner and form than as heretofore authorized, either permanently or temporarily, he is hereby empowered, in his discretion, so to do; and the proper executive officers of the company are hereby empowered and instructed to execute and deliver any necessary and proper papers, and to do any and all proper and necessary things, under the direction of the president, to carry this provision into effect. The president is further authorized and empowered to make or to cause to be made any contract for the construction and equipment of the proposed line of road of this company from its present terminus to Augusta, Georgia, or any part of it, together with all things usual, necessary, incident thereto, upon such terms and conditions as he deems best, and to therein contract for the payment or sale of any or all said bonds, stock, and lands.'

It further appears, from the same record of proceedings, that the following resolution was presented and unanimously adopted, to wit:

'Resolved, that William Bailey, of St. Louis, Mo., be and hereby is elected a member of this board, to fill one of the vacancies now existing, and also that said Bailey be and hereby is elected to be vice president of this company, to fill the existing vacancy.'

On the same day a resolution was passed, authorizing the president to appoint a general manager of the company, and to fix his salary. On May 28, 1889, four days following, the president of the company, Blake negotiated and executed a construction contract with one Frank M. Green, represented by his attorney in fact, William Bailey, for the construction of the road. By the terms of the contract, Green was to be paid for constructing the railroad to Augusta, in bonds and shares of the company, to wit, $16,000 first mortgage bonds, $7,000 second mortgage land-grant bonds, and $20,000 stock of the company, for each completed mile. William Bailey, the newly-elected vice president, not only appears as attorney for said Green in the said construction contract, but for the sum of one dollar, and other valuable considerations, he guarantied the performance of the contract on the part of Green. This construction contract was signed by the Augusta, Tallahassee & Gulf Railroad Company, by Henry A. Blake, president, John L. Rooney, secretary, with the seal of the company attached. After the making of the said contract, it appears the president, Blake, appointed Contractor Green assistant general manager of the company.

About the middle of September following, the appellee, Joseph J.

Kittel, something of a capitalist, according to his own evidence, became interested in the affairs of the company. According to the evidence, about the time mentioned, he was approached by a broker to loan money, and was by him (the broker) introduced to Bailey, vice president, and afterwards to Blake, president. The result of the negotiation was that, on the 18th of September, Kittel loaned the railroad company the sum of $25,000, receiving as evidence thereof three several promissory notes, wherein the said company promised to pay to Kittel, or his order, the aforesaid sum of $25,000, with interest from the date of the loan at 5 3/4 per cent. per annum, in gold coin of the United States, at its then standard value, in the amounts and at the times specified, that is to say: One note for $10,000, payable 6 months after date, with interest aforesaid from September 18, 1889; one note for $7,500, payable 7 months and 10 days after date, with interest aforesaid from October 28, 1889; and one note for $7,500, payable 8 months and 10 days after date, with interest aforesaid from November 27, 1889. To secure the payment of the said several promissory notes and the said sum of $25,000, with the interest to accrue thereon, the railroad company executed and delivered to Kittel a mortgage of the 109,000 acres of land heretofore referred to. Said mortgage contained various provisions, not necessary to recapitulate.

This transaction was entered into on the part of Kittel under the advice of counsel, after an examination of the books and records of the company in regard to the power and authority of Blake, president, to make the loan and execute the mortgage. The evidence shows that the said some of $25,000 was paid over, according to the contract, in four different checks drawn by Kittel, on the Union Trust Company, to the order of the railroad company, Blake, president, indorsing for $10,000, and M. W. Hayward, assistant treasurer, for $15,000, thereof. On the same day that the notes and mortgage were executed, and as a part of the same transaction, an agreement was entered into between Frank M. Green, of Kansas City, Mo., represented by William Bailey, his attorney in fact, William Bailey, individually, and Henry A. Blake, of the city of New York, parties of the first part, Joseph J Kittel, of the city of New York, party of the second part, and the Augusta, Tallahassee & Gulf Railroad Company, party of the third part. This contract recited that, in consideration of the loan that day made by Kittel to the railroad company, of $25,000, and as an additional inducement to and...