Mercer County v. Pittsburgh and Erie Railroad Company

• Decision Date: 01 January 1857
• Citation: 27 Pa. 389
• Parties: Mercer County versus The Pittsburgh and Erie Railroad Company.
• Court: Pennsylvania Supreme Court

27 Pa. 389

Mercer County versus The Pittsburgh and Erie Railroad Company.

Supreme Court of Pennsylvania.

THIS was a bill in equity, at the suit of the County of Mercer against The Pittsburgh and Erie Railroad Company, and the officers and directors of the same company. The bill of the complainants charges that the railroad company was incorporated by virtue of an Act of Assembly approved the 21st April, 1846, with the powers and privileges therein contained, and those conferred by the several supplements thereto. And that on the 4th day of May, 1852, an Act of Assembly was passed, which, among other things, authorized the commissioners of the county of Mercer to subscribe for shares in the capital stock of the Pittsburgh and Erie Railroad Company. The certificates of loan, or bonds, that might be issued in payment of the stock subscribed, to bear an interest of 6 per cent. per annum, payable half-yearly. The subscriptions to be subject to the restrictions, limitations, and conditions contained in the act. Such subscription to be made after, and not before the amount thereof should have been designated, advised, and recommended by a grand jury of said county.

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Stephenson, for complainants.

Kunkel, for respondents.

The motion for a preliminary injunction was denied, a rule granted on the defendants to answer by the first day of September, 1856, and a commissioner appointed to take the testimony.

On the 30th of October, 1856, the answer of defendants, by Thomas J. Power, the president, was filed. In this it was alleged that the subscription made by Charles M. Reed and others of Erie, and standing upon the books of the company at the time the county of Mercer subscribed, was a bona fide subscription, and that five per centum thereof was duly paid as required by law into the treasury of the company by the subscribers, and all legal requirements complied with by them: and that no illegal or fraudulent transfer was ever made of it by them. That the whole transaction was entered upon the books of the company, which have been open at all times to the inspection of all parties interested. That the ability of the company to construct its road has not been diminished or impaired by such alleged suppression or transfer of stock, nor from any other cause; and that the company, so far from being insolvent, is in a more prosperous condition than at any former period of its existence, and especially at the time of the subscription by the county of Mercer. That at their session of 1856 the legislature granted to the Erie and North-East Railroad Company certain powers and immunities, upon condition that such company would subscribe $400,000 to the capital stock of the defendants' corporation, or construct as much of the road as would require an outlay of that sum, and which act has been accepted by the Erie and North-East Railroad Company, which would make that sum an available subscription to the defendants. That in addition thereto the company has available subscription to its stock by corporations and individuals equal to more than $800,000, making its available resources more than $1,200,000, a sum believed to be sufficient to complete the road, and which, if not embarrassed by applications like the present, suggested by hostile railroad interests, would secure its completion in two years, or less time.

The respondents denied that any part of the bonds of the county of Mercer were expended for any other purpose than the construction of the road, and in no instance for less than the par value. That about $65,000 of the bonds have been paid out to contractors for work done on the road in Mercer county, and the residue, about $85,000, remain in the hands of B. F. Baskin, the treasurer of the company, and can only be paid out for the work done on the road as it progresses, being specially pledged for the construction of the road in Mercer county.

They further answered that the sum of two dollars and fifty cents on each share subscribed by Charles M. Reed and others, was paid in cash, as appears by the certificate of the Secretary of the Commonwealth, appended to the answer, to which reference was craved.

That the subscription of the county of Mercer was regularly made in pursuance of the Act of Assembly authorizing it. A regular and lawful presentment recommending it was made by the grand jury of the county, and directing a subscription not exceeding one hundred and fifty thousand dollars, and that the subscription was made in pursuance of and in accordance with the directions of the grand jury to the amount of one hundred and fifty thousand dollars, and the county commissioners appointed William S. Garvin, Joseph Kerr, and William G. Brown as managers or directors to represent the county of Mercer in the board of directors of the Pittsburgh and Erie Railroad Company in September, 1853. That these persons continued in office and performed the duties of directors of the company until superseded by the appointment of William Stewart and William Maxwell, to succeed them on the 6th of February, 1855. And that no promises or inducements of any kind were offered by the company, or by any person on its behalf, to the commissioners or any other person to procure the subscription or the delivery of the bonds. But that the making of the subscription and the delivery of the bonds by the commissioners of Mercer county was strictly in the performance of their official duty under the Act of Assembly of the 4th May, 1852, the subscription having been recommended and directed by a grand jury, designating the amount as fully as was required of them by the said act.

The answer concluded in the usual manner, and prayed to be hence dismissed, with the costs and charges in that behalf expended.

The Act of the 4th of May, 1852, authorizing the subscriptions by the county of Beaver, Lawrence, Mercer, Crawford, and Erie, or either of them, contained the following: —

"Provided, That the subscriptions to be made by all or either of the counties of Beaver, Lawrence, Mercer, Crawford, and Erie, shall be made subject to the following restrictions, limitations, and conditions, and in no other manner or way whatever, viz.: all such subscriptions shall be made by the county commissioners of the county subscribing, and shall be made by them after and not before the amount of such subscription shall have been designated, advised, and recommended by a grand jury of said county or counties; and the amount of such subscription shall not, in any case, exceed six per cent. on the assessed valuation of said county or counties so subscribing; and the amount of such subscription ordered and designated as aforesaid, may be made payable, either in money or in the bonds duly executed and authenticated of the said county or counties so subscribing in sums of not less than one hundred dollars; and such bonds shall in no case, or under any pretence, be sold, assigned, or transferred by the said Pittsburgh and Erie Railroad Company, at less than the par value thereof; and the bonds so issued shall not be subject to taxation for any purposes, till after the clear annual profits of the said road shall amount to six per cent. on the cost thereof; and provided further, that the acceptance of this act by the company shall be deemed also an acceptance of the provisions of the act passed the 11th day of March, 1851, entitled An Act fixing the gauges of railroads in the county of Erie."

The Act of 11th March, 1851, provided that the tracks of railroads running westwardly from the city of Erie to the Ohio state line, should be of the gauge, of four feet ten inches, and those east and south, of the gauge of either six feet, or four feet eight and one-half inches.

On the 18th January, 1853, at a meeting of the stockholders of the company, it was resolved that it was inexpedient to accept at that time the subscriptions of the several counties, on account of the proviso which made the acceptance of the benefits of the Act of 4th May, 1852, an acceptance of the "Gauge Law." But that the ultimate acceptance or rejection of the subscriptions be postponed for further consideration at some subsequent meeting.

On the 11th April, 1853, the Act of 11th March, 1851, known as the "Gauge Law," was repealed. And, on the 25th of the same month, the board of directors, at a meeting held, caused notice to be given to the counties which had subscribed, that the subscriptions had been accepted by the company; and a committee of three members was appointed to secure the bonds of Mercer county at the earliest possible day.

The bonds were accordingly issued and delivered, as stated in the bill of complaint.

The evidence returned, together with the answers of the respondents showed, that on the 19th November, 1849, Charles M. Reed, and nineteen others, subscribed to the capital stock of the company 15,110 shares of $50 each, amounting to $755,500, of which Reed subscribed 14,500. On this stock 5 per cent. was required to be paid, in order to lift the charter. Charles M. Reed was constituted receiving commissioner, and upon his receipt and certificate of the payment of the same, the charter was obtained.

On the 14th August, 1851, Reed and the other original subscribers were authorized by the board of directors to transfer the stock held by them respectively to David McAllister, the secretary of the Company, and they to be released from further liability on it.

On the 24th December, 1851, this same stock was reassigned to the same parties who had previously held it, and on the same day they transferred it to J. B. Curtis and others. Reed and his co-subscribers were thereupon released from all further calls or liability on the stock. The board of directors also authorized the treasurer to receive the notes of the parties to whom the stock was transferred, amounting in the aggregate to the sum of $37,775, being the amount in the hands of Reed as receipting...