French v. Shoemaker

• Decision Date: 01 December 1871
• Citation: 14 Wall. 314,20 L.Ed. 852,81 U.S. 314
• Parties: FRENCH v. SHOEMAKER
• Court: U.S. Supreme Court

81 U.S. 314

20 L.Ed. 852

14 Wall. 314

FRENCH v. SHOEMAKER.

December Term, 1871

APPEAL from a decree of the Circuit Court for the District of Virginia; the case was thus:

In the year 1854 the legislature of Virginia passed an act to incorporate the Washington and Alexandria Railroad Company. Two persons, J. S. French and Walter Lenox, subscribed for the whole stock; French taking three-fourths and Lenox one-fourth, and French being made president of the company. The road was built. French and Lenox, however, spent very little money of their own in its construction, but raised large sums by borrowing. When, therefore, the road was built the company was seriously embarrassed. Two deeds of trust had been executed in 1855, and in 1857 another deed was made to Lenox, as trustee, to secure bonds, issued to raise money for the purposes of the road.

The civil war broke out when the road was in this condition. French and Lenox went South, and the government took military possession of the road.

During their absence, a proceeding was instituted in the Alexandria County Court for the removal of Lenox as trustee in the deed of trust to him, and for the substitution of a new trustee in his place. A new trustee, one Stewart, was appointed, and he proceeded in alleged conformity to the deed of trust to sell the railroad.

Under the sale thus made, a new company was organized, which assumed the name of the Washington, Alexandria, and Georgetown Railroad Company; and the government having relinquished the road in 1865, this company took possession of it at once; and not long afterwards entered into a contract with the Adams Express Company, represented by one Shoemaker, in relation to the conveyance of express freight, and the furnishing by the company of means to work the road. This contract did not prove satisfactory, and by consent of both parties, a lease for ten years was made to two persons, named Stevens and Phelps, in May, 1866; and in the following June, another contract for means of operation and for the conveyance of express freight was made for ten years with the Adams Express Company.

Litigation soon arose upon this lease and upon these contracts. One Davison, asserting himself to be a stockholder of the Washington, Alexandria, and Georgetown Railroad Company, filed his bill in the Alexandria County Court, in November, 1866, alleging that the lease was made without authority, and in fraud of the rights of the stockholders, and praying that it might be set aside and annulled. The Adams Express Company filed its bill about the same time, in the Circuit Court of the United States for the District of Virginia, praying for the enforcement of its contract with the company, and with the lessees; and under that proceeding an order was made by the Circuit Court for the appointment of receivers of the road, who took possession.

The Washington and Alexandria Railroad Company, describing itself as that company, by J. S. French, its president, had already in March, 1866 (the government having, with the suppression of the rebellion, given up, as already said, its possession, and French and Lenox having returned from the South), filed its bill in the Alexandria County Court asserting its title to the road, charging fraud in the whole proceeding for the organization of the Washington, Alexandria, and Georgetown Railroad Company, and praying that it might be declared void, and that a decree might be made establishing its own original title to the road as unimpaired by that proceeding. But French, when he returned to Alexandria, was very needy, and so much in debt that he was quite without means to work this railroad if he had had it, or even to get a decree establishing the old company's title to it. Lenox was little or no better off. And the debts of the road were very heavy.

In this condition of their pecuniary concerns, and in the general state of opposed and opposing interests, in November, 1866, French and Lenox had an interview in Washington, at the house of Mr. Merrick, who had been the counsel of Stevens and Phelps, with Shoemaker (representing the Adams Express Company), Stevens and Phelps, the lessees under the new, or as it was sometimes styled the 'spurious' road, and Dean Smith, who had been counsel of Shoemaker, at which interview an inchoate agreement was made for the organization of a new company and the payment of the debts of the old one. This meeting, which was a long one, and where the whole condition of things was largely gone into, was apparently satisfactory to French. Shoemaker, Stevens and Phelps, and Smith were the active managers of the Washington, Alexandria, and Georgetown Railroad at this time, and perhaps its formal directors, but all seemed to be of the opinion that the sale by the trustee Stewart and the new organization could not stand in law.

This inchoate agreement remained unacted upon for some months, its details being the subject of conversations among the parties. It was subsequently reduced to writing, and at another meeting signed by all the parties except French, who was absent. It was not then dated; the date was left in blank.

The stipulations of this agreement in substance were:

1st. That French and Lenox would convey all their interest in the Washington and Alexandria Railroad Company to a corporation to be formed as specified, or to devote all of that interest to the common benefit of the parties, in the proportion specified, should the Washington and Alexandria Railroad be revived and the corporation by that name again come into existence.

2d. That when the parties should have agreed to reorganize and should actually reorganize that company, or should organize another company on the basis of the title of French and Lenox, Stevens and Phelps would assign to the company all their interest as lessees of the Washington, Alexandria, and Georgetown Railroad Company, or hold the same for the exclusive use of the parties to the agreement, according to their respective interests.

3d. That Shoemaker, for himself and the Adams Express Company, would aid the corporation to be formed or reorganized by money and credits; that is, to pay, settle or compromise all liabilities of the Washington and Alexandria Railroad Company, the liabilities of the lessees of the Washington, Alexandria, and Georgetown Railroad Company for stock and materials for the road, and all the bon a fide liabilities incurred by them in behalf of the road; Shoemaker to be substituted in all rights of creditors paid by him; all compromises to be for the benefit of all the parties or the new organization; no advances to discharge liens to be refunded until the final end of litigation; a majority in interest to have the right to substitute other securities for any thus acquired by him; and the net receipts of the company to be formed or reorganized to be devoted to reimburse the advances made by him, except 20 per cent. of the receipts, to be divided among the parties to the agreement in proportion to their interests.

4th. That the agreement should be carried into effect on the rendering of the decree of the Alexandria County Circuit Court in the case of The Washington and Alexandria Railroad Company v. The Washington, Alexandria, and Georgetown Railroad Company, and the new company to be formed or reorganized with a capital stock of 3000 shares, to be divided among the parties thus: French and Lenox, 1250; Stephens and Phelps, 850; Shoemaker, 500; Dean Smith, 200; G. W. Brent, 200.

5th. The lessees to be continued under the new corporation as general superintendent and manager, receiving $250 per month each until otherwise ordered by the board of directors, as to salary.

When the agreement thus reduced to writing was presented to French, early in the year 1867, by Mr. G. W. Brent, who was the professional adviser of French and Lenox, French refused to sign it, for certain reasons which were the subject of conversation between him and Brent; one of the reasons being that a certain $5000 which were to be advanced to him were not provided for in the agreement. Finally, however, on the 6th of December, 1867, French signed the contract. On the same day a separate contract was made between French and Shoemaker, by which the latter advanced the former $5000 on the transfer to the latter of French's right and interest in the road. By this separate deed from French to Shoemaker, French conveyed, on account of $5000 paid him by Shoemaker, all his right and interest in the railroad, for the purpose of securing the payment of the $5000, and for the purposes set forth in the agreement of same date, 6th December, 1867.

After the courts in Virginia had finally decided, as they did on 28th August, 1868, the case of The Washington and Alexandria Railroad Company v. The Washington, Alexandria, and Georgetown Railroad Company in favor of the plaintiff therein, reinstating the said company and annulling the charter of the new company, Lenox (September 22d, 1868) called a meeting of the parties who had signed the agreement of 6th December, 1867; the purpose of the meeting being to carry into effect the provisions of that agreement. French was present at the meeting. The meeting directed, among other things, that Mr. Brent should prepare and publish a call to form the new company in accordance with the provisions of the Virginia code. The proceedings were printed and French received a copy. Acting under the instructions given to him, Brent did prepare a form of call and caused to be called a meeting at the Mansion House Hotel, in Alexandria, Va., for the 29th October, 1868.

The meeting was duly held. Lenox was present, and voted on the stock assigned him by the agreement of 6th December, 1867. Shoemaker was elected president of the company. One day previously, that is to say, on the 28th day of October, 1868, French filed a bill of complaint in the Circuit Court of Alexandria County, Virginia, against Shoemaker, the Adams...