Bissit v. Kentucky River Nav. Co.

• Citation: 15 F. 353
• Parties: BISSIT v. KENTUCKY RIVER NAVIGATION CO. and others. [1]
• Decision Date: 01 June 1882
• Court: D. Kentucky

15 F. 353

BISSIT v. KENTUCKY RIVER NAVIGATION CO. and others. ^[1]

United States Circuit Court, D. Kentucky.

June, 1882

William Lindsay and Richards & Baskin, for complainant.

Isaac Caldwell and Wharton & Ray, for defendants.

BAXTER J.

The act of March 1, 1865, entitled 'an act to incorporate the Kentucky River Navigation Company,' under which the defendant corporation organized, authorized the county courts of the several counties bordering upon or interested in the navigation of said river to subscribe for and in behalf of their respective counties to the capital stock of said company, and levy and collect a tax to pay the same. County subscriptions were accordingly made to the amount of $775,000. These were supplemented by a subscription of $150,000 by the city of Louisville, $100,000 by Bissit &amp McMahon, and $2,300 by 23 other individuals. Thus fortified with subscriptions aggregating $1,027,300,-- which the company then believed to have been duly made pursuant to the law,-- the company entered into a contract with Bissit &amp McMahon, of which firm complainant was a member, whereby said firm undertook and agreed to do all the work contemplated by the company's charter, and specified in said contract for the gross sum of $1,000,000, to be paid in monthly installments upon the estimates of the company's supervising engineer, less 10 per cent. to be retained as a guaranty for the completion of the work. By an agreement between themselves, to which the company was in no way a party, McMahon soon thereafter sold his interest in the contract to complainant, who began work thereunder in June 1869, and continued the same until December, 1870. But in the mean time a disputation arose in regard to the validity of said county subscriptions. Suits followed, resulting in a decision by the court of appeals in the cases of Mercer and Garrard Counties v. Kentucky River Nav. Co. 8 Bush, 300, holding that the subscriptions claimed to have been made by said counties had not been made in conformity with the requirements of the statute conferring the authority, and that the same were invalid and not binding upon them. Thereupon the city of Louisville, and all the counties in whose behalf subscriptions had been made, denied the validity of the same, and refused from that time forward to further participate as shareholders in the control of the corporate business. But complainant, in virtue of his ownership of the $100,000 of stock subscribed by Bissit & McMahon, as aforesaid, assumed exclusive control of the corporation, and, through a board of directors, which he from time to time selected, kept up its organization until after the recovery by him of the judgment at law, to be hereafter more particularly referred to. During the time the complainant was thus in exclusive possession and control of the company's business he began a suit at law in this court, in which he demanded from said corporation $104,850.90, with interest thereon for work and labor alleged to have been done and material furnished under and pursuant to his contract, and $100,000 for profits claimed to have been lost by reason of the suspension and discontinuance of the work. In this suit he recovered a judgment for $132,500 and costs; and failing to realize thereon, after the due and regular issuance of an execution for that purpose, he filed his bill in this case, in which he charges that the defendants Estill, Owsley, and Jessamine counties were indebted to the Kentucky River Navigation Company for subscriptions respectively made by them to the capital stock thereof; the first, in the sum of $25,000; the second, in the sum of $50,000; and the last in the sum of $100,000. And upon these allegations complainant prays for a decree to compel said counties to pay their several subscriptions to the company, to the intent that the proceeds when realized may be applied in liquidation of his judgment.

It is clear if the corporation is indebted to the complainant, and that the defendant counties are indebted, as alleged, to the corporation, the complainant is entitled to the relief prayed for. But the defendants insist (1) that the legislature possessed no constitutional power to authorize such subscriptions; (2) if it had such power their alleged subscriptions were not made pursuant to the law; and (3) if the same were made in conformity with the statute, the Kentucky River Navigation Company was not, at the time complainant recovered his judgment, or afterwards, indebted to the complainant anything, and that said judgment was collusively and fraudulently obtained, and that it is not conclusive of their rights.

The questions thus presented by the first and second defenses have been considered and passed on by the court of appeals in the cases of Mercer and Garrard Counties, supra. The first impression of the court was adverse to the constitutionality of the act under which the subscriptions were made, and an opinion to that effect was prepared and announced. But upon a rehearing, the court, three of the four judges constituting the court concurring therein, abandoned the position on which they rested their first decision, and placed their second decision on the ground that the subscriptions, the validity of which were involved in those cases, had not been made by the county courts in accordance with the requirements of the act authorizing the same, and were, therefore, not binding upon said counties. In this connection the court said that subscriptions could only be made under the act through orders of the county courts, made and entered of record by the courts when sitting in their organized capacity, which, in themselves, amounted to completed contracts of subscriptions; and that subscriptions made by commissioners in the one case under authority of an order of court declaring 'that $25,000 be directed to be subscribed,' and in the other, 'that $100,000 shall be subscribed,' were not valid and obligatory on the counties in whose behalf the same were made. The reasoning of the court throughout is a clear and distinct recognition of the constitutionality of the law. The declaration that valid subscriptions could only be made through and by means of orders made and entered of record by the county courts, etc., is, in view of the history of those cases, equivalent to a positive declaration that such subscriptions might have been made in that way, and the same necessarily implies that the statute by which such subscriptions were authorized was and is a constitutional statute.

Such, at least, is the natural and reasonable interpretation of the language employed, and this construction of the state constitution by the highest court of the state is conclusive on this court.

The constitutional question out of the way, we are brought to the consideration of the second defense, to-wit: Do the records of the county courts of the defendant counties evidence completed contracts of subscription, within the purview of the act authorizing the same, as construed by the court of appeals? Herein lies the vital point of this controversy. If the orders made by these courts constitute valid subscriptions, within the meaning of that act as construed by the court of appeals, the complainant is entitled to relief; otherwise, his bill will have to be dismissed.

We have not the time to enter upon an elaborate discussion of the details. It must suffice to say that, in the judgment of this court, the records of Estill and Owsley county courts are in nowise materially different from the records of Mercer and Garrard county courts, which were held to be insufficient to bind said counties; and as nothing has since transpired to cure the defects therein, the complainant's bill will, as to these two counties, be dismissed, with costs.

But the case as to Jessamine county cannot be so summarily disposed of. The county court of this county, at its September term, 1865, 'ordered that the sum of $35,000 be subscribed' to the capital stock of the defendant company, and appointed John S. Brannaugh a commissioner to make the subscription on the books of the company; and at its November term, 1867, it was further 'ordered that John S. Brannaugh be and is hereby authorized and directed to subscribe the further sum of $65,000 to the stock' of said company, subject to certain conditions therein stated. The subscriptions thus authorized and directed were accordingly made by the commissioner named on the books of the company, and the same were accepted, with the conditions annexed, and notice thereof communicated to the court.

Now it may be conceded that these orders do not, when measured by the reasoning of the court of appeals in the cases to which reference has been had, constitute completed and valid subscriptions on the part of the county. But it is manifest that the county court and the defendant company understood the legal effect thereof differently. It appears that after the subscriptions had been made by the commissioner Brannaugh, in behalf of the county, and accepted by the company and notice thereof given to the court, the latter proceeded to make and enter of record several orders clearly and distinctly recognizing the validity of said subscriptions. These were followed by an agreement between the court and the company to pay in five instead of four annual installments, and an order was duly made and entered of record levying an ad valorem tax of 50 cents on each $100 worth of the taxable property of the county for the payment of the first installment; and more than $18,000 of the tax thus levied was collected, and, by the express order of the court made and entered of record in November, 1869, paid by the county treasurer to the defendant company in part discharge of the county's subscription. For...