Dewey v. Toledo, A.A. & N.M.R. Co.

• Court: Michigan Supreme Court
• Writing for the Court: LONG, J.
• Citation: Dewey v. Toledo, A.A. & N.M.R. Co., 51 N.W. 1063, 91 Mich. 351 (Mich. 1892)
• Decision Date: 08 April 1892
• Parties: DEWEY et al. v. TOLEDO, A. A. & N.M. RY. CO.

51 N.W. 1063

91 Mich. 351

DEWEY et al. v. TOLEDO, A. A. & N.M. RY. CO.

Supreme Court of Michigan

April 8, 1892

Error to circuit court, Shiawassee county; WILLIAM NEWTON, Judge.

Action by Thomas D. Dewey and John Stewart against the Toledo, Ann Arbor & North Michigan Railway Company to recover the balance due on a promissory note. Judgment for plaintiffs. Defendant brings error. Affirmed.

T. W. Whitney, for appellant.

Hanchett, Stark & Hanchett, for appellees.

LONG J.

This action was brought to recover upon a promissory note given July 3, 1882, and made payable to the order of James M Ashley, president of the Toledo, Ann Arbor & Grand Trunk Railway Company. It was given for the sum of $9,120, and was signed by the Toledo, Ann Arbor & Grand Trunk Railway Company, by B. F. Jarvis, auditor. It was indorsed by J. M Ashley, president, and J. M. Ashley, payable to the order of T. D. Dewey, and by Dewey indorsed to the plaintiffs in this suit. Several payments were indorsed upon the note in 1883 and 1884. The amount remaining due and unpaid at the time of the trial was conceded to be $4,499.76, and for which amount the plaintiffs had verdict and judgment in the court below. Defendant brings the case here by writ of error.

The plaintiffs, to make their case, in the first instance proved the execution of the note by the defendant, and its indorsement to Dewey or order by the payee, by a stipulation in the case made by the attorneys of the parties, and the indorsement of Dewey to the plaintiffs. The stipulation is as follows: "In this cause it is stipulated that the same be continued over the December term of 1890 without costs, and on the part of the defendant the execution of the note declared upon, a copy of which is given in the declaration, by the Toledo, Ann Arbor & Grand Trunk Railway Company, as maker, and its indorsement by the payee, are admitted, so that plaintiffs need not be put to proof of such execution and indorsement, other than by producing the note in evidence; but no defense to the note is waived." The plea of the defendant is the general issue, and no affidavit was filed, denying the execution of the note. The position of the defendant on the trial was: (1) That the agreements, which are in writing, and which must be construed by the court, show that the transfer of stock for which the note was given was made to James M. Ashley, and the debt represented by such note was his debt; and the note, if the note of the company, was to secure the debt of James M. Ashley, and thereby became accommodation paper, and the act was ultra vires and void. (2) That it was necessary to prove the authority and power of the auditor to sign the note before the same was admissible in evidence, as the auditor had no such authority and power unless authorized by a resolution of the board of directors, and that the stipulation did not waive the necessity of making the proof. (3) That even if the sale and transfer of the stock of the Owosso & Northwestern Railroad Company, for the payment of which the note was given, was to the Toledo, Ann Arbor & Grand Trunk Railway Company, and for its benefit, its purchase was an act the railway company had no authority and power to do, and was ultra vires, and the note given therefor was void.

It appears that the note was given in payment of a portion of the capital stock of the Owosso & Northwestern Railroad Company, which was a company organized to build a railroad from Owosso northwest to Frankfort, this state. The Toledo, Ann Arbor & Grand Trunk Railway Company was organized to build a railroad from Ann Arbor to Pontiac. The Toledo, Ann Arbor & North Michigan Railway Company, the defendant here, was organized after the note in suit was given, to wit, October 28, 1882, to build a road from Owosso to St. Louis. On May 24, 1884, the last two named railroad companies were consolidated, in pursuance of the statute, under the name of the latter company. At the time the note was given some other papers were executed between the parties, which relate to the note, and which were offered by defendant's counsel, and were admitted in evidence by the trial court, as relating to the question of the consideration for which the note was given. These papers were: (1) A proposition on the part of Mr. Dewey to sell to J. M. Ashley, his agents or assigns, all the stock held by Dewey in the Owosso & Northwestern Railroad Company, which was two thirds and more of all the stock, with a guaranty that the road was free from debt, for the sum of $12,180 to be paid, one fourth in 90 days, and the balance in one year, to be secured by the note of the Toledo, Ann Arbor & Grand Trunk Railway Company, with interest at 6 per cent.; the note to be secured by a transfer of a certain quantity of iron rails, to be delivered at Owosso. Also, that Ashley was to build the road from Owosso to Alma in two years if $6,500 of aid was raised on the line between those points. This paper was dated April 4, 1882. The second paper was an acceptance of that proposition of the same date, and signed by J. M. Ashley, Jr., and J. M. Ashley by J. M. Ashley, Jr., his attorney. In this acceptance it is recited that "the offer of Dewey has been accepted by J. M. Ashley, and in pursuance of which Ashley has paid to Dewey the sum of $3,060, and that he herein agrees for the railroad company of which he is president, to wit, the Toledo, Ann Arbor & Grand Trunk Railway Company, the owner of the iron rails, to secure the balance, which arrangements, payments, and agreements have been made by J. M. Ashley, Jr., who in said business represents himself to be the attorney of said company, and authorized by said company and its president to make said contract, and sign his name thereto; and it is further agreed that on failure to comply with the terms of said offer and proposition the stock which has this day been assigned by said Dewey to James M. Ashley, Jr., as trustee, shall be reassigned to said Dewey: provided, that the failure to build the road in the time mentioned shall not work any forfeiture of the contract, if the work is being in good faith carried on." J. M. Ashley on July 7, 1882, made another paper on behalf of the railroad company, and signed it in the name of the company, as attorney for it, to the effect that a chattel mortgage should be given upon these iron rails to secure the note. On August 16th following the chattel mortgage was given, signed by J. M. Ashley, in which the indebtedness of the Toledo, Ann Arbor & Grand Trunk Railway upon the note was recited. It was then shown upon the part of the plaintiffs that certain of the payments made and indorsed on the note were made through the First National Bank of Owosso by J. M. Ashley, Jr., by Owosso city bonds issued to the Toledo, Ann Arbor & Grand Trunk Railroad, and that certain payments were made upon the note from the funds of the Toledo, Ann Arbor & Grand Trunk Railway Company, and paid by its checks.

At the close of the testimony the defendant, by its counsel, requested the court to charge the jury: (1) That the note sued upon was given in pursuance of the agreement of April 4, 1882, by which Thomas D. Dewey agreed to transfer certain shares in the Owosso & Northwestern Railway Company to James M. Ashley, as shown by the undisputed testimony. (2) That the note so given was for the purpose of enabling James M. Ashley to purchase said stock. (3) That a railway company has no right to give a note obligating itself to pay for property acquired by another. (4) That this defendant is not liable, as between itself and Thomas D. Dewey, on the note, as above described. (5) That notice of the character of this note herein sued upon, if possessed by Dewey, must also be attributed to the plaintiffs, Dewey & Stewart, partners. (6) That, under the evidence in this case, plaintiffs cannot recover.

The plaintiffs claimed upon the trial, and that claim is made here: (1) That the note sued upon is the note of the Toledo, Ann Arbor & Grand Trunk Railway Company, and not the note of Ashley, and that the railroad company is the maker and principal obligor, and not merely an accommodation maker. (2) That the note was given for stock which the railway company actually had, and that the said railway actually used a portion of the old roadbed of the Owosso & Northwestern Railway Company in the building of its road from Owosso to the northwest, and had all the benefits which the majority of the stock gave in that company. (3) That the giving of the note upon the purchase of such stock, and acquiring the rights of such road, was an act which the company could do, as it was not a parallel or competing line, under the provisions of section 3403, How. St., and that by virtue of the provisions of such statute the defendant, as successor of the Toledo, Ann Arbor & Grand Trunk Railway Company, became liable for the debt. (4) That the defendant, not having filed an affidavit denying the execution of the note, by the stipulation admitted its due execution, and admitted the indorsements made.

The court directed the jury, in his general charge, in substance (1) That the stipulation admitted the signature of Mr. Ashley and of the road, but did not admit the liability of the company. (2) That it was a question for the jury to determine, whether the sale of this stock was made to the Toledo, Ann Arbor & Grand Trunk Railway Company or to Mr. Ashley, or to Mr. Ashley as trustee in trust for the railway company. If made to the company, or to Mr. Ashley in trust for it, and the railway company had the use and benefit of it, together with the franchises and the property represented by the stock, the contract would not be ultra vires. That the railway company had the right, for the purpose of building its road, to...