Deposit Bank of Owensborough v. Barrett

• Decision Date: 15 March 1890
• Citation: 13 S.W. 337
• Parties: DEPOSIT BANK OF OWENSBOROUGH v. BARRETT et al.
• Court: Kentucky Court of Appeals

13 S.W. 337

DEPOSIT BANK OF OWENSBOROUGH v. BARRETT et al.

Court of Appeals of Kentucky.

March 15, 1890

Appeal from circuit court, Daviess county.

"Not to be officially reported."

Weir Weir & Walker and W. N. & J. J. Sweeney, for appellant.

G. W Williams, R. S. Bevier, and W. F. Browden, for appellees.

PRYOR J.

The Evansville, Owensborough & Nashville Railroad Company originally incorporated as the Owensborough & Russellville Railroad Company, was declared a bankrupt many years since many of its creditors holding its first mortgage bonds for money advanced, or other indebtedness. These creditors, for the purpose of securing their debts, gave to Barrett, Weir, and Brown a writing authorizing them, as their agents, to purchase the road and its franchises at the bankrupt sale; the bid not to be made unless those holding or representing $1,000,000 of the bonds should sign the writing creating the agency. The writing being signed, the road was sold in May, 1877, and purchased at $63,000 by the agents of the bondholders. After the purchase, the road was placed under the control of a new corporation, called the Owensborough & Nashville Railroad Company. This was done under the act of March, 1876, and now a part of the General Statutes, authorizing the purchasers of a railroad to become a corporate body for the purpose of operating and completing. The provisions of the charter are, in substance, such as are usually found in such charters; and the corporation thus created was really composed of the bondholders and creditors who had made the purchase. The new corporation was created in May, 1877, the same month in which the road was purchased. The agents of these bondholders were permitted to transfer their bid to the new corporation, manifestly with the consent and knowledge of their principals, and for the purpose of securing the large indebtedness of the old corporation.

This action was filed in the year 1883 by the Deposit Bank of Owensborough, one of the bondholders, against the new corporation and its agents, Brown, Weir, and Barrett, seeking to recover the value of its interest in the property purchased, and alleging that it had been converted to the use of the new corporation without its consent, and also asking an account of the management of the road. The appellant, the bank, claims that it had no right to become a shareholder in the new corporation; that such an act would have been ultra vires; and, besides, that it never gave its consent to become a member of the new body. It appears from the record that one T. S. Anderson, purporting to represent the bank, recognized the existence of the corporation, and voted the number of shares of the bank on certain amendments and that one of the attorneys of the bank, and perhaps a director, participated at one of its meetings, although not at the instance of the bank, and, while no corporate action was ever taken by the bank, or these parties directed by the corporate authority to act for it, it is evident that the creation of the new corporation was known to the bank, and that it was a party to the action in which the road was sold, and the bid by its agents transferred to the new corporation. It had the right to consent to the transfer of the bid, and must have known through its chief officers that the transfer had been made. That the bank had the right to consent to the transfer is unquestioned, and that it did consent is plain from the facts before us. The bank was entitled, if not a member of the corporation created when the bid was transferred, to its share of the purchase money, and nothing more. We think, however, it was a member of the corporation to the extent that it was entitled to the stock in lieu of its debt, or of its interest in the proceeds of sale made to the new corporation. It was making the effort to secure the indebtedness, and the purchase of the road had not accomplished the purpose, and there was no reason why the...