Fid. Ins v. Shenan Doah Val. R. Co

• Decision Date: 25 February 1889
• Citation: 32 W.Va. 244,9 S.E. 180
• Court: West Virginia Supreme Court
• Parties: Fidelity Ins., T. & S. D. Co. v. Shenan doah Val. R. Co.

9 S.E. 180

(32 W.Va. 244)

Fidelity Ins., T. & S. D. Co.

v.Shenan doah Val. R. Co.

Supreme Court of Appeals of West Virginia.

Feb. 25, 1889.

Corporations—Contracts—Mortqages—Notice —Release—Trustees.

1. Where the contract of a corporation purports to be sealed with its corporate seal, and it is proven to be signed by the proper agents of the corporation, the presumption is that the seal was affixed by the proper authority, and such contract will be held valid until the contrary is shown.

2. The presumption of authority to affix the corporate seal to a contract will not be overcome by the mere fact that no vote of the directors authorizing it is shown.

8. Notice to a trustee is notice to the cestui que trust; and this rule applies to trustees under an ordinary mortgage made by a railroad company to secure the holders of bonds issued under it.

4. Where a subsequent purchaser has actual notice that the property in question was incumbered or affected, he is charged constructively with notice of all the facts and instruments to the knowledge of which he would have been led by an inquiry into the incumbrance or other circumstance affecting the property of which he had notice.

5. An entry of satisfaction by the mortgagee, after he has parted with his interest in the security, will not discharge the mortgage in favor of one who had acquired an interest in the land before the discharge was made.

6. A mortgage is executed by a railroad company on its property to secure bonds to be issued thereunder, which provides that upon the full payment of all said bonds at maturity the trustee shall release the same. Before the maturity of the bonds they are surrendered to the trustee, upon an agreement that other bonds to be issued under a subsequent mortgage are to be substituted for them. The trustee, without substituting such other bonds, executed a release of the mortgage, stating therein that all the bonds "had been surrendered." The railroad was not in a condition to anticipate the payment of its bonds, and had executed several other mortgages to take up bonds issued under former mortgages. Held, these facts and circumstances were sufficient to charge a subsequent mortgagee with notice of the terms and conditions upon which the bonds under said released mortgage had been surrendered, and he takes subject to the rights of those entitled to the bonds under said agreement.

7. The trustee can only do with the trust property what the deed, either in express terms or by necessary implication, authorizes him to do.

8. The cancellation of a mortgage on the record is only prima facie evidence of its discharge, and the owner may prove that the cancellation was done by fraud, accident, or mistake, and, if he does this, his rights will not be affected by the improper cancellation of it.

9. Where the road of a railroad company passes into two states, in each of which it is a domestic corporation, and the trustee in a mortgage upon the whole road first brings a suit in one state to foreclose the mortgage, and afterwards brings an ancillary suit in the other state for the same purpose, the plaintiff in said suits cannot object to or prevent a lien creditor of the railroad company, who has not filed his claim in the first suit, from intervening in the second to establish hi9 lien.

(Syllabus by the Court.)

Appeal from circuit court, Jefferson county

McDonald & Moore and D. B. Lucas, for appellants. W. H. Travers, W. J. Robertson, J. C. Bullitt, Geo. B. Caldwell, and Frank P. Clark, for appellees.

Snyder, P. Appeals from two decrees of the circuit court of Jefferson county, —the one pronounced November 29, 1887, in the suit of J. Garland Hurst, administrator of H. H. Cruinlish, deceased, suing on behalf of himself and all other stockholders of the Central Improvement Company, against the Shenandoah Valley Railroad Company; and the other pronounced September 11, 1888, in the suit of the Fidelity Insurance, Trust & Safe-Deposit Company, trustee, against the said Shenandoah Valley Railroad Company. As the record is voluminous and the facts complicated, an understanding of the questions to be determined may be facilitated by first giving a brief statement of some of the prominent facts appearing in the record.

The Shenandoah Valley Railroad Company was organized in May, 1870, under acts of the legislatures of the states of Virginia, West Virginia, and Maryland, for the purpose of constructing and operating a railroad; and the road, as constructed by it, now extends from Hagerstown, in the state of Maryland, through Jefferson county, in West Virginia, to the city of Roanoke, in the state of Virginia. The Central Improvement Company was organized in July, 1870, under an act of the legislature of the state of Pennsylvania, passed April 9, 1870, for the purpose of constructing any work, public or private, and for other purposes. Three written contracts were entered into between the improvement and said railroad companies, designatedas contracts Nos. 1, 2, and 3. No. 1, dated August 9, 1870, was for the construction of the railroad by said improvement company from Shepherdstown to Big Lick, (now Roanoke city,) a distance of 233 miles, the work to be completed by August 10, 1872, at the price of $35,000 per mile of track laid, payable in first and second mortgage bonds of the said railroad company, and certain county bonds, as the work progressed. No. 2, dated August 1, 1872, was practically a substitute for No. 1, and provided for the construction of the railroad from Shepherdstown to Waynesboro, a distance of only 140 miles, and fixed October 1, 1874, as the time for the completion of the work. No. 3, dated April 23, 1873, was supplemental to contract No. 2, and conferred upon the improvement company the power to vote a large amount of the stock of said railroad company. On October 15, 1872, the said railroad company executed to J. Edgar Thompson, trustee, a first mortgage on its road and franchises between Shepherdstown and Waynesboro, to secure $3,750, 000 of first mortgage 7 per cent, gold bonds, being $25,000 per mile of the road. During the month of September, 1873, $781,-000 of these bonds were issued, and delivered to said improvement company on account of its contracts for the construction of said railroad; and of these bonds $250,000 were subsequently delivered by the improvement company to the Pennsylvania Railroad Company as collateral security for loans made by the latter to the improvement company; leaving in the hands of the improvement company the balance of $531,000 of said bonds. On January 7, 1873, a resolution was passed by the stockholders of the improvement company authorizing its president and treasurer to dispose of the securities receivable under its contract with the said railroad company. Work on the railroad was abandoned by the improvement company in the fall of 1873, and never afterwards resumed by it. Jefferson county, on behalf of itself and the other stockholders of the Shenandoah Valley Railroad Company, in April, 1874, filed its bill in the circuit court of Clarke county, Va., to set aside the aforesaid contracts, Nos. 1, 2, and 3, between the said railroad company and the improvement company. A final decree was entered in this suit on December 8, 1874, whereby said contracts Nos. 2 and 3 were set aside and declared void, but the court refused to set aside contract No. 1. In December, 1876, an attachment suit in equity was brought in the circuit court of Warren county Va., by J. T. Griffith, suing in the name of H. H.Crumlish for his use, against the Central Improvement Company and the Shenandoah Valley Railroad Company, to attach whatever stock might be held by the improvement company in the said railroad company, and any indebtedness due from the latter to the former, to satisfy a debt due to the plaintiff from the said improvement company on account of work done for the latter in the construction of said railroad. The suit was afterwards transferred to the circuit court of Clarke county, and referred to a commissioner, who made a report holding that the $781,-000 of bonds aforesaid had been delivered by the railroad company to the improvement company under the said contracts Nos. 2 and 3, which had been set aside and declared void in the aforesaid Jefferson county suit, and that the said delivery was void. In December, 1878, an amended bill was filed by Griffith, in which he averred that the said bonds had been delivered under said contract No. 2, which had been declared void, and, consequently, the said delivery was without authority and void, and the debt which these bonds had been transferred to pay was still a subsisting debt due from the said railroad company to the improvement company, and liable to the plaintiff's attachment. In January, 1880, Griffith, on behalf of himself and the other creditors of the improvement company who had by petition made themselves plaintiffs, filed a petition in the suit, in which it is averred "that all these bonds thus issued ($781,000) have been returned and canceled, and the mortgage securing them has been released, and they have been substituted by a like number of bonds issued under a second mortgage, recorded, for $15,000 per mile."

On May 18, 1880, the court entered a decree in favor of the plaintiff, Griffith, against the Central Improvement Company for $8,826.33, and ordered the sale of 5, 000 shares of stock of the Shenandoah Valley Railroad Company, held by the improvement company at the time the attachment was sued out by Griffith, to pay said sum; and the court being of opinion that the improvement company had, subject to the lien of the attachment of Griffith, and before the filing of the petition and amended bill making the general creditors parties, made a valid assignment of the said stock to the Pennsylvania Railroad Company, it denied the relief prayed for by the general creditors, and the amended bill, so far as it asked relief in their behalf, was...