First Div. St. Paul & Pacific R. Co. v. Parcher

• Decision Date: 01 January 1869
• Citation: 14 Minn. 224
• Parties: FIRST DIV. OF THE ST. PAUL & PACIFIC R. CO. v. FRANK M. PARCHER, County Treasurer, etc., and HENRY KREIS, County Auditor, etc.
• Court: Minnesota Supreme Court

Page 224

14 Minn. 224

FIRST DIV. OF THE ST. PAUL & PACIFIC R. CO.

v. FRANK M. PARCHER, County Treasurer, etc., and HENRY KREIS, County Auditor, etc.

Supreme Court of Minnesota.

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Appeal by defendants from an order of the district court, Wright county, overruling a demurrer to the complaint.

The action was brought to enjoin the enforcement of taxes upon lands of the plaintiff claimed by it to be exempt by the charter of the Minnesota & Pacific Railroad Company, under which it claims. Defendants demurred to the complaint upon these grounds:

First. That the plaintiff hath no capacity to sue, for that it is not a body corporate, nor a natural nor an artificial person.

Second. That there is a defect of parties plaintiff, in that the complaint shows that one E. B. Litchfield and sundry other persons not named in the complaint are the real parties in interest, and therefore should be named as plaintiffs in the action.

Third. That the complaint does not state facts sufficient to constitute a cause of action.

Gordon & Collins, for appellants.

H. R. Bigelow, for respondent.

BERRY, J.

This appeal is taken from an order overruling a demurrer to the complaint. The complaint alleges that the plaintiff is a body corporate, created and existing under and by virtue of certain laws and proceedings therein mentioned and referred to. The first ground of demurrer is that it appears upon the face of the complaint that the plaintiff is not a body corporate, and has no legal capacity to sue as such. For the purpose of determining the issue thus made, it is necessary for us to examine the laws and proceedings referred to and set up in the complaint.

By an act of the legislative assembly of the territory of Minnesota, approved May 22, 1857, the Minnesota & Pacific Railroad Company was incorporated and endowed with "all the powers, privileges, franchises, and immunities incident to a corporation." On the twenty-seventh day of May, 1857, said company was duly organized under the act aforesaid, and on the same day duly signified its acceptance of the terms and provisions of its charter.

By a constitutional amendment adopted April 15, 1858, four companies, commonly known as the "Land-Grant Railroad Companies," were authorized to receive from the state, in aid of the construction of their lines of railway, certain bonds designated as "Minnesota State Railroad Bonds." This amendment provided, among other things, that as further security for the payment of the principal and interest of the state bonds thus authorized to be issued, "an amount of first-mortgage bonds on the roads, lands, and franchises of the respective companies, corresponding to the state bonds issued, shall be transferred to the treasurer of the state at the time of the issue of state bonds, and in case either of said companies shall make default in payment of either the interest or principal of the bonds issued to said companies," the governor "may require a foreclosure of the mortgage executed to secure the same."

The Minnesota & Pacific Railroad Company was one of the four land-grant companies, and, as alleged in the complaint, it received Minnesota state railroad bonds to the amount of $300,000, and more, under and pursuant to the provisions of the amendment to the constitution, which said bonds were so issued and delivered to said company upon securities given as prescribed and required in said amendment, and by an act of the legislature entitled "An act concerning land-grant railroads," approved August 12, 1858.

By section 5 of the act of August 12, 1858, above referred to, it is provided that foreclosures of the mortgages or deeds of trust required by the amendment to the constitution should be "by public sale of all the property, rights, privileges, and franchises pledged in such deed of trust or mortgage; * * * and in case of any sale of any railroad or railroads, or any part thereof, constructed or in process of construction, by any railroad company by virtue of any trust deed, or on foreclosure of any mortgage thereupon, the party or parties acquiring title under any such sale, and their associates, successors, or assigns, shall have and acquire thereby, and shall exercise and enjoy thereafter, all and the same rights, privileges, grants, franchises, immunities, and advantages in and by said mortgage or trust deed enumerated and conveyed which belonged to and were enjoyed by the company making such deed or mortgage, or contracting such debts, so far as the same relate and appertain to that portion of the said road, or the line thereof, mentioned and described in and conveyed by said mortgage or trust deed, and no further, as fully and absolutely in all respects as the corporation, shareholders, officers, and agents of said company might or could have done theretofore had not such sale or foreclosure taken place. Such purchaser or purchasers, their associates, successors, or assigns, may proceed to organize anew and elect directors, distribute and dispose of stock, take the same or another name, and may conduct their business generally under and in the manner provided in the charter of such railroad company, with such changes or variations in manner and form of organization as their altered circumstances and better convenience may seem to require: provided, however, that no greater or enlarged powers shall be exercised by the new organization than are conferred by the charter of such company."

The act of March 6, 1860, being an act in addition to the "Act concerning land-grant railroads," after reciting the default of the companies in providing for the payment of interest, made it the duty of the governor to foreclose the mortgages or deeds of trust, and authorized him to bid off and purchase the property, rights, and franchises covered and embraced in such mortgages or deeds of trust, in the name of the state, and to make or cause to be made to the state proper conveyances therefor.

The complaint further alleges that said Minnesota & Pacific Railroad Company having made default in providing for the punctual payment of the interest upon the bonds issued to it by the state, the governor proceeded to foreclose the mortgage or deed of trust given to secure the state, and did, in fact, foreclose the same, in conformity with law, and with the provisions of such deed of trust, by sale of the property, rights, and franchises covered and embraced in said deed, and under such sale, made on or about June 23, 1860, did bid off and purchase the same for and in the name of the state.

What did the state acquire by virtue of the foreclosure? The security required by the amendment to the constitution, and which is alleged in the complaint to have been given by the Minnesota & Pacific Railroad Company, was a certain amount of the company's bonds secured by a first mortgage upon its "roads, lands, and franchises." This language will bear but one construction, and that is that the mortgage required and given was a first mortgage upon all the roads, all the lands, and all the franchises of the company. This included the corporate franchise, or the right to be a corporation. The power to mortgage this corporate franchise was conferred upon the company by the twenty-first section of its charter; or, if there be any doubt as to this, it is clear that it was conferred by the amendment to the constitution which required and, of course, authorized all the land-grant companies accepting the state bonds to secure the state by a first mortgage upon all their franchises, as we have before seen. The state of Minnesota became then, by virtue of the foreclosure, the owner of all the roads, lands, and franchises of the Minnesota & Pacific Railroad Company. It was competent for the state to take and hold whatever it acquired by the foreclosure, without merger or extinguishment; to lay down its sovereign character for the occasion, and take and hold like a private individual. This power was plainly conferred upon the state, as upon any other purchaser, by the acts of August 12, 1858, and of March 6, 1860, before referred to; and, independent of these statutes, the same principles and the same reasons which prevent the merger of an equitable in a legal estate, when the two are in the same person, and where the intention and interest of such person require them to be kept separate, would permit the state in this instance to acquire and to hold the fruits of the foreclosure unmerged and unextinguished. See Davis v. Pierce, 10 Minn. 378, (Gil. 302;) Horton v. Maffitt, ante, 216; Bank of U. S. v. Planters' Bank of Georgia, 9 Wheat. 904; Ang. & A. Corp. § 32.

It was for the interest of the state to hold what was acquired through the foreclosure without merger, because this would better enable it to secure the successful prosecution of important enterprises which it could not well carry on itself. If the state was in a position to offer to parties willing to undertake the construction of the roads all the franchises of the original companies, it was able to offer greater inducements than if any of these franchises had become extinguished upon the foreclosure. As a recipient of the congressional land grant, the state had assumed a trust which good faith and public interest required to be discharged in the way most likely to accomplish its purposes. That it was necessary to hold out great advantages in order to induce parties to enter upon and prosecute the construction of the roads, is matter of history. The long delays and repeated discouragements which the people of this state experienced in their attempts to secure convenient communication with the markets of the country are familiar to all.

That it was the intention of the state to hold what she acquired without merger will, we think, sufficiently appear from legislation subsequent to the foreclosure, to which we shall have occasion to advert more particularly hereafter, by which she assumed to transfer...