Eastern Townships Bank v. St. Johnsbury & L.C.R. Co.

• Decision Date: 07 November 1889
• Citation: 40 F. 423
• Court: U.S. District Court — District of Vermont
• Parties: EASTERN TOWNSHIPS BANK v. ST. JOHNSBURY & L.C.R. CO.

40 F. 423

EASTERN TOWNSHIPS BANK v. ST. JOHNSBURY & L.C.R. CO.

United States Circuit Court, D. Vermont.

November 7, 1889

Dickerman & Young and Albert P. Cross, for plaintiff.

Stephen C. Shurtleff and Richard Olney, for defendant.

WHEELER J.

The defendant joined with other railroad companies in taking a lease of the railroad of the Canada Junction Railroad Company, not built, but agreed to be built by Bradley Barlow and in the execution of this guaranty upon 150 $1,000 negotiable bonds of that company, which Barlow was to have in payment for building the road: 'For value received in the use and operating of the Canada Junction Railroad under a lease thereof and assignments of said lease, the Montreal Portland & Boston Railway Company, the Southeastern Railway Company of Canada, and the St. Johnsbury & Lake Champlain Railroad Company of Vermont, do hereby jointly and severally guaranty the payment of the interest upon the within bond, as specified in the interest coupons thereto attached at the place and at the several dates therein specified. ' The rent was equal to the coupons, which were themselves negotiable, in amount and times of payment. The bonds, with the guaranty upon them, and coupons attached, were delivered to Barlow, and by him pledged to the Vermont National Bank of St. Albans, and by that bank to the plaintiff, to secure advances of money. Barlow failed without accomplishing but a small part of the building of the road, and his failure caused the enterprise of building the road, and the Vermont National Bank, to fail. The road has never been built, and through the failure and default of Barlow, the defendant, with the other railroad companies, has been deprived of the use and operating of it for which the guaranty was made.

This suit is brought by the plaintiff, as holder of the bonds and coupons for value, upon the guaranty, to recover the amount of the coupons due, and has been heard by the court upon written waiver by the parties of a trial by jury. The defendant contends that the guaranty was without the scope of its corporate powers, and therefore void; and relies upon Thomas v. Railroad Co., 101 U.S. 71, Railroad Co. v. Railroad Co., 118 U.S. 290, 630, 6 S.Ct. 1094 and Navigation Co. v. Railway Co., 130 U.S. 1, 9 S.Ct. 409, in support of this position; and that, if not, the consideration has so far failed, through the default of Barlow, to whom the bonds were first delivered, that it has ceased to be binding. In those cases no power had been conferred upon the corporations in question, by their charters or the laws under which they existed, to enter into the contracts held to be ultra vires and void. The laws of Vermont, under which the defendant has and exercises its corporate powers, provide that 'railroad companies in this state may make contracts and arrangements with each other, and with railroad corporations incorporated under the laws of other of the United States, or under the authority of the government of Canada, for leasing and running the roads of the respective corporations, or a part thereof, by either of their respective companies. ' R.L. Vt. Sec. 3303. This statute conferred ample power upon the defendant corporation to take the lease, and to agree to pay the rent as it should fall due, and doubtless to arrange for paying the rent, by paying coupons of the same amount or guarantying their payment. Railroad Co. v. Railroad Co., 34 Vt. 1, 50 Vt. 500; Langdon v. Railroad Co., 54 Vt. 593; Hazard v. Railroad Co., 17 F. 753. To hold these arrangements to be within the corporate powers of the defendant appears to be in accordance with the principles of and not contrary to, the decisions of the supreme court of the United States referred to. The laws of the state also provide that 'a railroad corporation, if it so votes at a meeting of its stockholders called for that purpose, may issue its notes or bonds in sums not less than one hundred dollars to raise money or to extinguish any debt or liability of the company, on time not to exceed thirty years, and at a rate of interest not to exceed seven per cent.' R.L. Vt. Sec. 3350. In a class of cases absolute guarantors of payment of promissory notes by indorsement upon the notes themselves have been holden as makers. Hough v. Gray, 19 Wend. 202; Miller v. Gaston, 2 Hill, 188; Edw. Bills, 220. These guaranties are not upon the coupons, strictly, but upon the bonds separate from the coupons. If, however, they should be considered as being upon the coupons, so that each coupon would be a note of which the defendant was...