Chicago & G.T. Ry. Co. v. Miller

• Decision Date: 08 April 1892
• Parties: CHICAGO & G. T. RY. CO. v. MILLER et al. SAME v. HASLETT et al.
• Court: Michigan Supreme Court

51 N.W. 981

91 Mich. 166

CHICAGO & G. T. RY. CO. v. MILLER et al.

SAME v. HASLETT et al.

Supreme Court of Michigan

April 8, 1892

Appeal from circuit court, St. Clair county, in chancery; ARTHUR L CANFIELD, Judge.

Two suits, one by the Chicago & Grand Trunk Railway Company against John E. Miller and William L. Bancroft, and the other by same against James H. Haslett and William L. Bancroft, to enjoin the prosecution of two actions. Decrees for complainant in each case. Defendants appeal. Affirmed.

O'Brien J. Atkinson, (Benton Hanchett, of counsel,) for appellants.

E W. Meddaugh, (H. Geer and Otto Kirchner, of counsel,) for appellees.

LONG, J.

The bills in these cases are filed to enjoin the further prosecution of two actions at law brought by the defendants Miller and Haslett as plaintiffs against the complainant as defendant. In each case the plaintiffs sued as assignees of defendant Bancroft. The complainant is charged as the successor of the Chicago & Northeastern Railroad Company in each action. In the Miller Case the action was for moneys expended for the Chicago & Northeastern Railroad Company in building fences, station-houses, freight-houses, water-tanks semaphores, and for work, labor, and material provided and money paid by Bancroft for that company. In the Haslett Case the action was for moneys to be due to Bancroft upon a contract made by Bancroft with the Chicago & Northeastern Railroad Company, by the terms of which Bancroft was to receive $1,000 per mile for right of way furnished by him to said company. Before the organization of the Chicago &amp Northeastern Railroad Company, which extended from the city of Flint to the city of Lansing, a distance of about 50 miles, a railroad had been built and put in operation from Port Huron to the city of Flint, called the "Port Huron & Lake Michigan Railroad Company." A road had also been built south-westward from Lansing to the state line of Indiana, called the "Peninsular Railroad," and that had been extended westward to Valparaiso, Ind., and was called the "Peninsular Railroad of Indiana." These three railroad companies had been consolidated by agreement between the different companies, and a new consolidated company, called the "Chicago & Lake Huron Railroad Company," was formed. After its consolidation defendant Bancroft became its general manager, and thereafter was appointed receiver of the consolidated company by the circuit court of the United States for the eastern district of Michigan in equity wherein the Union Trust Company of New York, in behalf of the bondholders, was complainant, and the Chicago & Lake Huron Railroad Company was defendant. While defendant Bancroft was acting as receiver for that company which extended from Port Huron to Flint and from Lansing to Valparaiso, in the state of Indiana, and on the 12th day of August, 1874, articles of association were filed organizing the Chicago & Northeastern Railroad Company, Mr. Bancroft becoming one of the subscribers to the shares of the capital stock. This last-named company was organized for the purpose of constructing a railroad from the city of Flint to the city of Lansing in order to make a continuous line from Port Huron west ward to Valparaiso. Mr. Bancroft continued in the discharge of his duties as receiver of the Chicago & Lake Huron Railroad Company up to January 21, 1878, before which time the Chicago & Northeastern Railroad had been constructed and put in operation. At the time of the organization of the Chicago & Northeastern Railroad Company Mr. Bancroft subscribed for 100 shares of its capital stock. James M. Turner, Isaac Gale, and others, of this state, and William R. Bowes, of Indiana, also became subscribers. The company was organized under the general railroad laws of this state with a nominal capital of $1,000,000. A board of directors was duly elected, and it is claimed that $2,500 was paid in, being the 5 per cent. of the $1,000 per mile required by the statute. On the 10th day of November following defendant Bancroft entered into a contract with the company, through William R. Bowes, its fiscal agent and secretary, to construct the railroad from the city of Flint to the city of Lansing, its entire length. By the terms of this contract Bancroft was to build complete that part of the road from Flint to its crossing with the Detroit & Milwaukee Railroad within one year, and to complete the balance within two years from that date. The work was to be done in conformity with the specifications which were annexed to the contract; and in payment therefor Bancroft was to receive $1,250,000 in its first-mortgage bonds and the further sum of $997,500 in its common stock, the bonds to be delivered from time to time as they might be called for by him, and the stock to be delivered $600,000 upon the signing of the contract and the balance upon the completion of the road to the city of Lansing. The contract further provided that unless the company should procure the right of way on or before the 1st day of February following Bancroft might, at his option, procure the same, and be paid therefor at the rate of $1,000 per mile in cash. It was further provided in the contract that Bancroft should be entitled to all notes and subscriptions to capital stock that might have been or might be made by any party or parties, as donations or otherwise, to the company to aid in the building of said road. The secretary and treasurer of the company, by the terms of the contract, were to use the corporate name of the company, in indorsements or otherwise, as Bancroft might require from time to time to aid in the purchase of rails or otherwise facilitate the construction of the road. The specifications of this contract, and made a part of it, provided for the usual excavations, embankments, bridges, culverts, rails, ties, cattle-guards, planking of the highway crossings, ballasting, and also provided that "the chief engineer of the company shall be sole umpire and arbiter of the character, quantity, and quality of the work done by the contractors, and also the progress of the work and the final completion of the contracts." The contract and specifications made no provision for fencing, side tracks, switches, semaphores, water-tanks, station-houses, freight-sheds, nor for any of the appointments required by the general railroad law, without which the road could not be operated. After the execution of this contract Mr. Bancroft entered into a contract with Clark Bros. to construct 25 miles of the road, commencing at Lansing and extending east, by the terms of which Clark Bros were to furnish a large quantity of the iron, for which they were to receive $125,000 in cash, $130,000 in bankable paper, and $130,000 in first-mortgage bonds of the company. These bonds, by the terms of the contract, were accepted by Clark Bros. at their face value. In this same contract with Clark Bros. it was contemplated that work not specified would be done under the contract, it being expressly provided that one-fourth of the amount to be paid for extra work should be paid in bonds of the company, fixed at 80 cents on the dollar. Under these contracts the road was completed about January 1, 1877. Mr. Bancroft, during the time he was engaged in constructing it, received the entire amount of the bonds and the whole amount of stock of the company, less 25 shares, as provided in the contract, and obtained from Mr. Bowes a certificate, indorsed upon the contract, as fiscal agent of the company, that the road had been completed according to the terms and conditions of the contract. Upon the completion of the road, and during the time of its construction, Mr. Bancroft had pledged or in some manner disposed of a large amount of the stock and bonds of the company to what is known as the "Flint Pool" and to O'Brien J. Atkinson and Edgar White at Port Huron. After the completion of the road under the contract, Mr. Bancroft, still acting as receiver of the Chicago & Lake Huron Railroad, by some arrangement (but with whom made is not very definitely stated in the record) commenced running trains of cars over the entire length of the road from Port Huron to Valparaiso upon an agreement to pay to the Chicago & Northeastern Company for the use of its road between Flint and Lansing the sum of $2.50 per car hauled over its road. This arrangement was continued until the 21st day of January, 1878, when James M. Turner, acting for himself and the Flint pool and others who had acquired a majority of the stock and bonds of the Chicago & Northeastern Railroad Company, made an arrangement with Mr. Vanderbilt, of New York, by which Mr. Vanderbilt became the owner of such stock and bonds and at once assumed control of the road, James M. Turner acting as its president. Subsequently, and in September, 1879, the Vanderbilt interests were conveyed to Sir Joseph Hickson, of the Grand Trunk Railroad system, as trustee, and on March 23, 1880, these several lines of roads extending from Port Huron to Valparaiso were consolidated under the name of the Chicago & Grand Trunk Railway Company, the complainant in these cases.

Before Mr. Vanderbilt acquired such interest in the Chicago & Northeastern Company Mr. Bancroft had erected along the line of the road fences, station-houses, freight-houses, water-tanks, semaphores, etc. It is not claimed that any written contract was ever made between the company and Mr. Bancroft for this work, or in fact that any resolution was adopted by the board of directors directing it to be done, the claim being that the individual members of the board of directors authorized it, and agreed from time to time that payments should be made. At the time Vanderbilt purchased the stock and bonds the books of the company did not show any...