County Court of Taylor County v. Baltimore & O.R. Co.

• Decision Date: 16 June 1888
• Court: Circuit Court of Virginia
• Parties: COUNTY COURT OF TAYLOR COUNTY et al. v. BALTIMORE & O.R. CO. et al.

35 F. 161

COUNTY COURT OF TAYLOR COUNTY et al. v. BALTIMORE & O.R. CO. et al.

United States Circuit Court, D. West Virginia.

June 16, 1888

B. F Martin and Joseph Marum, for complainants.

John A Hutchinson and Caleb Boggess, for defendants.

JACKSON J.

The pleadings and proofs in this case disclose that the Grafton &amp Greenbrier Railroad Company had constructed a railroad from Grafton to Philippi in this state, which was completed about the 1st day of January, 1883. That during the construction of this railroad, it being represented to the Baltimore & Ohio Railroad Company that it would be an important feeder to their main line, at the request of the Grafton & Greenbrier Company the Baltimore & Ohio Company advanced it money material, and property amounting to about $90,000. That on the 19th day of October, 1883, the Grafton & Greenbrier Railroad Company executed a deed of trust or mortgage 'on its railroad from Grafton to Philippi, and on all other property between these points then owned and thereafter to be acquired by it on this portion of its road,' to secure 175 of its negotiable bonds of $1,000 each, making a sum total of $175,000, which were to bear date the 1st day of January, 1884, due in 30 years after date, interest payable semi-annually. After the execution of this mortgage, the Grafton & Greenbrier Company, finding it difficult to negotiate their bonds, made an application through their officers or agents to the Baltimore & Ohio Company to take a portion of the bonds secured by this mortgage. As a result of the negotiations by the officers of the two companies, the Baltimore & Ohio Company concluded to take $120,000 of the first mortgage bonds of the Grafton & Greenbrier Company at 90 per cent. of their par value; that is to say, $120,000 in bonds at the price of $108,000, which was to cover and liquidate the advances already made by the Baltimore & Ohio Company, leaving a balance of $18,000 to be accounted for, and which, it is conceded, was accounted for in their future settlements. That afterwards the Grafton & Greenbrier Company desiring to extend their road from Philippi to Belington, a distance 17 miles south of Philippi, at a stockholders' meeting of their company on the 28th day of December, 1886, they decided to borrow a sum of money for that purpose, not exceeding $250,000, and to issue its coupon bonds at 6 per cent., to run 30 years, upon which to raise money. At the same meeting it was determined also to extinguish the existing mortgage upon the property, and take up the bonds secured by it with the bonds to be issued under the new mortgage, which was to be known as the 'first consolidated mortgage.' This mortgage was executed on the 20th day of January in the year 1887, and placed upon record on the 10th day of March following. That prior to the execution of this mortgage a committee of directors of the Grafton & Greenbrier Company, composed of John W. Mason, Mr. Hall, and Mr. Whitescarver, applied to the Baltimore & Ohio Company again, to secure further aid to construct the proposed extension to Belington; and in an interview between the committee and Mr. Spencer, vice-president at that time, of the Baltimore & Ohio Company, the propriety of the Grafton & Greenbrier Company making a consolidated mortgage to cover not only its existing line, but its proposed extension, was discussed, and as a result of such discussion, it was made to take the place of the first mortgage, and to secure further aid for the proposed extension. The evidence discloses the fact that sundry interviews took place between the officers and agents of the two companies in reference to the proposed aid of the Baltimore & Ohio Company to the Grafton & Greenbrief Company. That an understanding was supposed to have been reached between Mr. Spencer and Mr. Mason, representing the two companies. That subsequently it was discovered that there was a misapprehension as to the terms of the agreement that they had made, as it had not been reduced to writing. That with a view of adjusting the matters of difference between the two companies, Mr. Samuel Spencer, the then vice-president of the Baltimore & Ohio Company, on the 6th day of April, 1887, made a proposition in writing to Mr. Johnson Bradshaw, the president of the Grafton & Greenbrier Company, stating upon what terms the Baltimore & Ohio Company would lend further aid to the Grafton & Greenbrier Company, which proposition was accepted and acted upon by the president and directors of the Grafton & Greenbrier Railroad Company on the 7th day of April, 1887; and at that meeting the board of directors of the Grafton & Greenbrier Company appointed a committee, composed of John Bradshaw, its president, James E. Hall and J. Hop. Woods, two of its directors, to settle and adjust the accounts between the two companies. That on the 14th day of April, 1887, the committee and Mr. Spencer, the vice-president of the Baltimore & Ohio Company, made a settlement, which was reported to the board of directors of the Grafton & Greenbrier Company on the 27th day of April, called by its president, all of whom had due notice, and nine of whom were president, as appears by the minutes of that date, and at that meeting the settlement made by the committee and Vice-President Spencer was by unanimous vote ratified and confirmed. In consequence of this action on the part of the Grafton & Greenbrier Company, the Baltimore & Ohio Company surrendered $120,000 of the first mortgage bonds it held of the Grafton & Greenbrier Company, which were canceled and destroyed, and received in lieu thereof $120,000 of the first mortgage bonds it held of the Grafton & Greenbrief Company, which were canceled and destroyed, and received in lieu thereof $120,000 of the first consolidated bonds, and in addition thereto $116,000 in stock of the Grafton & Greenbrier Company, which was to cover the then indebtedness of the Grafton & Greenbrier Railroad Company to the Baltimore & Ohio Company, as well as the advances made for the construction and equipment of the extension of the line, at the rate of $4,000 per mile, at 90 per cent. of the face value thereof, and an equivalent amount of stock; all of which is embodied in the contract ratified by the board of directors on the 27th day of April, 1887. This settlement showed a balance of $22,500 in favor of the Grafton & Greenbrier Company, which was subsequently paid by the Baltimore & Ohio Company. It further appears that a regular meeting of the president and board of directors of the Grafton & Greenbrier Company was held on the 15th day of June following, at which meeting there was present 11 of the 12 directors, when 'the minutes of the two preceding meetings were read and approved. ' Several other meetings of the board of directors were subsequently held, at which they directed the proper officer of the company to pay the interest due the Baltimore & Ohio Company upon the bonds that it held of the Grafton & Greenbrief Company.

The complainants filed their bill on the 8th day of December, 1887, in the circuit court of Taylor county, in this state, and upon this state of facts they prayed, among other things, that the Baltimore & Ohio Railroad Company, and its officers and agents, be restrained from voting, or otherwise using or transferring, 1,160 shares of stock of the Grafton & Greenbrier Company, and that the company be enjoined and restrained from collecting or negotiating all the bonds received by it upon that settlement, and asking for general relief, and the injunction as prayed for was allowed by the judge of the circuit court of Taylor county in chambers. Shortly after this, and before the cause was matured for hearing, the defendants, the Baltimore & Ohio Railroad Company, the Grafton & Greenbrier Railroad Company, and Samuel Spencer, filed their answers to this bill, and at the same time the defendant the Baltimore & Ohio Company filed its petition, with proper affidavit and bond, to remove the cause into this court. And upon its motion this case was docketed on the 11th day of January, 1888. Issue was joined on the 5th day of March upon the answers filed.

Upon this state of the pleadings and proofs in the cause the plaintiffs moved to remand this cause-- First, because this is not a controversy between citizens of different states, claiming that the Baltimore & Ohio Railroad Company is a domestic corporation, and as such a citizen of the same state in which the plaintiff, as well as the Grafton & Greenbrief Company, the codefendant of the Baltimore & Ohio Company, are citizens; second, if the Baltimore & Ohio Company is a citizen of another state, still this is not a separable controversy, which can alone be heard as between the plaintiff and the defendant the Baltimore & Ohio Company, for the reason that the Grafton & Greenbrier Company is a material and necessary party to this suit, as important questions are presented by the pleadings litigating rights existing between the two companies.

The question whether the Baltimore & Ohio Company is a foreign corporation created by the laws of Maryland, and as such a citizen of the state of Maryland, is no longer an open question in this court. It has been repeatedly held by this court that it is a corporation created under the laws of Maryland, and is not a corporation created by any enabling act of Virginia or West Virginia. The court, as now constituted, in June, 1870, held in the case of Railroad Co. v. Supervisors, not reported, 'that the Baltimore & Ohio Company, was a foreign, and not a domestic, corporation, and that the Virginia act of 1827 conferred upon the company a mere license to transact...