Graham v. Boston Co

Decision Date10 May 1886
Citation6 S.Ct. 1009,118 U.S. 161,30 L.Ed. 196
PartiesGRAHAM and another v. BOSTON, H. & E. R. CO. and others. 1 Filed
CourtU.S. Supreme Court

[Syllabus from pages 161-162 intentionally omitted] B. F. Butler, R. A. Pryor, and Eugene M. Johnson, for appellants, William F. Graham and another.

W. G. Russell, Wm. Caleb Loring, C. S. Bradley, John C. Gray, and C. M. Reed, for appellees, Boston, H. & E. R. Co. and others.

BLATCHFORD, J.

This is a bill in equity, filed in the c

ircuit court of the United States for the district of Massachusetts, on the eighth of July, 1880, by William F. Graham, an alien, the owner of 500 shares of the capital stock of the Boston, Hartford & Erie Railroad Company, on behalf, not only of himself, but of every stockholder and creditor of the company who may join in the suit and contribute to its expense, to set aside as invalid a mortgage given by the company, dated March 19, 1866, covering its railroad, franchises, and property, existing and future, to Robert H. Berdell, Dudley S. Gregory, and John C. Bancroft Davis, as trustees, to secure the payment of an issue of bonds of the company to the amount of $20,000,000. The defendants are that company, and its assignees in bankruptcy; the New York & New England Railroad Company, which is in possession of and operating the railroad; certain persons now living, and the personal representatives of others now deceased, who have, at different times, acted as trustees under the mortgage; the treasurer and receiver general of the commonwealth of Massachusetts; George Ellis; Frederick A. Lane; and William C. Eayrs. Afterwards, Amelia T. Raymond, a holder of 100 shares, and two other shareholders, were admitted as co-plaintiffs. Four separate demurrers to the bill were filed, one of them being by the assignees in bankruptcy, and another by the New York & New England Railroad Company. They set forth, as grounds of demurrer, among other things, want of equity and laches. The case was heard on the demurrers, and in January, 1883, a decision was rendered (14 Fed. Rep. 753) dismissing the bill, on which a decree to that effect was entered, from which Graham and Raymond have appealed.

The mortgage covered all the property of the company in Massachusetts, Rhode Island, Connecticut, and New York. In December, 1865 there remained to be built, of the projected line of the road, 74 miles between Waterbury, Connecticut, and Fishkill, New York, and 26 miles in Connecticut, between Willimantic and Mechanicsville. The aggregate amount of liens, at that time, on the property and franchises owned or leased by the company, and which were prior liens to the $20,000,000 mortgage, (which will be called the Berdell mortgage,) was $9,904,650. The object of making the Berdell mortgage was to retire this prior lien debt, and complete and equip the road from Boston to Fishkill. In January, 1870, default was made in paying the six months' interest which then fell due on the mortgage. Soon thereafter the company's property was taken on legal process in several suits. In July, 1870, George Ellis and two other persons filed a bill in equity, in the supreme judicial court of Massachusetts, to foreclose the mortgage. Receivers were appointed, who took possession of the road August 2, 1870. In October, 1870, an involuntary petition in bankruptcy was filed against the company, in the district court of the United States for the district of Massachusetts, on which an adjudication was made March 2, 1871. Assignees were appointed, who, after the foreclosure was perfected, released to the trustees under the mortgage all the rights of the company in the mortgaged property. On the ninth of May, 1871, a decree was made in the Ellis suit, providing for the delivery of the mortgaged property by the receivers to the trustees; for the filing by the latter, in the office of the secretaries of state of Massachusetts, Rhode Island, Connecticut, and New York, of a notice that they had taken possession of the property for default in the payment of interest on the bonds, 'and with their purpose' to foreclose the mortgage for such default; and for the vesting of the property absolutely and in fee in the trustees, if default in the performance of the condition of the mortgage should continue for 18 months after the notice should be filed, in which case all equity of redemption of the mortgagor should be barred.

In September, 1871, the trustees entered and took possession for foreclosure, and filed the notices so provided for. The notices were of the character mentioned in the mortgage, which provided that, if a default in paying principal or interest should continue for 18 months after the filing of the notices, the property should vest in fee in the trustees, without further process of law, and all equity of redemption of the mortgagor should be barred. The foreclosure having been perfected, the trustees, pursuant to a decree made in June, 1875, in the Ellis suit, conveyed the mortgaged premises and franchises to the New York & New England Railroad Company, a corporation organized by the former bondholders, and delivered to it the property.

The first ground alleged in the bill for declaring the mortgage invalid is that it was authorized and made at a meeting of the shareholders of the company held in the city of New York; that it was not a corporation of New York, but was a corporation of Connecticut, Massachusetts, and Rhode Island; and that, therefore, the meeting was illegal, and the mortgage void. The circuit court held that the corporation was a New York corporation; that the meeting was lawfully held; and that its proceedings were valid and binding on the company.

In the mortgage the company is described as 'a corporation existing under the laws of the states of New York, Connecticut, Rhode Island, and Massachusetts.' The mortgage recites that 'the shareholders of the Boston, Hartford & Erie Railroad Company, at a meeting duly and lawfully called and held at the city of New York, on the fourteenth day of March, A. D. 1866, voted to authorize the directors to make application to the several legislatures of the states in which the chartered rights of the road exist, for authority to make a mortgage upon the whole or any portion of the line of the road, and to create, issue, and dispose of, at the best rates that can be obtained, their convertible bonds, payable in the city of New York, on the first day of July, A. D. 1900, for one thousand dollars each, not to exceed the amount of twenty millions of dollars in all;' with authority to the directors to make a portion of the bonds payable in London, 'interest payable semi-annually on the first days of January and July in each year, at the rate of seven per cent. per annum, interest and principal to be payable at such places in the city of New York or in London as the directors may authorize; and the particular form of bonds, interest warrants thereon, and mortgage to be left entirely at the discretion of the board of directors; the said bonds to be issued for the purpose of providing for and retiring all the existing mortgage debt and prior liens upon the line of the road of the party of the first part, and for the purpose of completing and equipping their road;' that 'the said board of directors, at a meeting duly convened and held in the city of New York, on the nineteenth day of March, 1866, voted to authorize the creation and issue of the first mortgage bonds of said company, in the following form,' (a form of a bond is here inserted;) and that 'the said directors, at their said meeting, further voted to empower bonds of said form * * * hereafter to be issued, and to be secured under the mortgage, * * * but not in a greater principal sum than twenty millions of dollars in all; * * * and, further, at the same time, voted to secure the entire issue of said bonds by the execution of a mortgage in the form of these presents.' It then conveys to the trustees named the railroad of the company, commencing at the foot of Summer street, in Boston, and thence extending through the states of Massachusetts, Connecticut, Rhode Island, and New York, to the western terminus of its location on the east bank of the Hudson river, at Fishkill, together with all the privileges, franchises, and property then owned, or thereafter to be acquired, by the company.

On the twenty-fifth of April, 1864, an act had been passed by the legislature of New York (Laws N. Y. 1864, c. 385, p. 884) entitled 'An act to consolidate the Boston, Hartford & Erie, the Boston, Hartford & Erie Extension, and the Boston, Hartford & Erie Ferry Extension Railroad Companies.' It provided as follows: 'The Boston, Hartford & Erie Extension Railroad Company, and the Boston, Hartford & Erie Ferry Extension Railroad Company, may both, or either, sell and convey to the Boston, Hartford & Erie Railroad Company the franchise and property of said several corporations, upon such terms as may be mutually agreed upon; and whenever certificates, under oath, of said Boston, Hartford & Erie Railroad Company, and a like certificate, under oath, of the other contracting corporation, shall be lodged in the office of the secretary of state, showing such sale and conveyance, and containing a full description of the rights and property conveyed, then, and in such case, such sale and conveyance shall be effectual in law to pass title to the franchise and property sold, conveyed, and described in such certificate, without other or further registry of the instrument of conveyance. And on the leaving of such certificate as above provided, the secretary of state shall file and record the same, and said Boston, Hartford & Erie Railroad Company shall become possessed of the rights of charter and property sold, conveyed, and described in said certificates; and may have, hold, and use the same in their own name and right as a portion of their railway line and property; and have all the rights the corporation making sale and...

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