State v. The Spartanburg & Union Railroad Co.

• Decision Date: 22 April 1875
• Citation: State v. The Spartanburg & Union Railroad Co., 8 S.C. 129 (S.C. 1875)
• Parties: THE STATE OF SOUTH CAROLINA v. THE SPARTANBURG AND UNION RAILROAD COMPANY.
• Court: South Carolina Supreme Court

8 S.C. 129

THE STATE OF SOUTH CAROLINA v. THE SPARTANBURG AND UNION RAILROAD COMPANY.

Supreme Court of South Carolina.

April 22, 1875

Where a railroad company issues bonds, with coupons for interest attached, which were guaranteed by the State, and, to secure the payment thereof, gave to the State a statutory lien on all the franchises, rights and property of the company, and the company afterwards failed to pay the coupons and became insolvent, and before the bonds became due the statutory lien or mortgage was foreclosed in an action by the State and all the franchises, rights and property of the company were sold Held , That the holders of the coupons past due at the time of the sale were not entitled to priority of payment over the owners of the principal debt, which was not then due, but that such proceeds were distributable pari passu between the holders of the coupons past due and the owners of the bonds.

In the distribution of equitable assets, the general rule is to treat all debts as standing upon the footing of equality and to be paid pari passu .

Creditors called in to present and establish their claims in an action for the settlement of the affairs of an insolvent corporation have the same right of exception, appeal and objection to the report, orders and decrees in the case as creditors who were parties to the action by name.

In an action for the settlement of the affairs of an insolvent corporation, a creditor who has been called in under a general notice to creditors to present their claims, and who stands by and silently acquiesces in the orders and proceedings that are taken in the cause, will not afterwards be allowed to come in as a party defendant and file an answer contesting the validity of the proceedings that have been already had in the cause.

The actions referred to in § 290 of the Code of Procedure,-requiring issues of fact to be made up to be determined by a jury,-are such actions as before the adoption of the Code were recognized as actions at common law.

Where an agent made a written contract for his principal and also for himself in his individual right, purporting to be a contract under seal, and affixed the seal opposite his own signature: Held , That such seal might be regarded as the seal of the principal as well as of himself.

A contract by an agent, under seal, but which does not require a seal to make it valid, may be ratified by the principal by any writing, acts or words which would be sufficient to confirm a simple contract.

A contract by one assuming to act as an agent, but not authorized so to act: Held , To have been ratified by the subsequent acts, conduct and acquiescence of the principal.

Where exceptions are taken to the report of a Referee because of the omission of facts alleged to have been proved, the proper course is to move the Circuit Court to recommit the report on the exceptions thus taken.

Where a creditor fails to submit his claim within the time fixed by an order calling in creditors, he is not debarred from coming in and proving his claim as long as the fund remains under the control of the Court.

BEFORE MACKEY, J., AT FAIRFIELD, FEBRUARY, 1874.

This was an action by the State of South Carolina, plaintiff against the Spartanburg and Union Railroad Company, Rufus Y McAden " and all other creditors of the same whose interest may require an answer to this complaint," defendants.

The summons and complaint were signed " D. H. Chamberlain Attorney General of the State of South Carolina, plaintiff, J. M. Baxter, James H. Rion, William Munro, Robert W. Shand, attorneys of counsel," and were dated 23d September, 1871.

The complaint alleged:

I. That the said Spartanburg and Union Railroad Company are a corporation duly chartered under and by the laws of the State of South Carolina, and pursuant to an Act of the General Assembly of the said State entitled " An Act to authorize the formation of the Spartanburg and Union Railroad Company," passed on the 17th day of December, A. D. 1847, and the Acts amending the same.

II. That by an Act of the said General Assembly of the said State entitled " An Act to afford aid in completing the Spartanburg and Union Railroad," passed on the 21st day of December, A. D. 1857, it was enacted in words as follows: That whenever satisfactory evidence shall be given to the Comptroller General that all liens on the property of the Spartanburg and Union Railroad Company have been removed, he shall be authorized and required to endorse upon bonds of the said company to an amount not exceeding one hundred and fifty thousand dollars the guarantee of the State of South Carolina, thereby pledging the faith and funds of the State for the payment of the said bonds and the interest to accrue thereon, which bonds shall be payable at such place as the President of the company may designate, and shall bear interest not exceeding the rate of seven per centum per annum, payable semi-annually, and shall not have more than twenty years to run: Provided , That none of the bonds so endorsed, as aforesaid, shall be sold by the company or used for the purpose of paying or satisfying any debt due and owing by them at less than their par value; and in case such bonds, or any of them, should be sold or used, as aforesaid, at less than their par value, the endorsement hereinbefore provided for shall be absolutely null as to the bonds so sold or used. And the Comptroller General shall also be authorized and required to endorse upon other bonds of the said company to an amount not exceeding sixty thousand dollars the like guarantee of the State, which said last mentioned bonds shall bear interest and be payable in like manner as the bonds first above mentioned, but shall not be subject to the proviso hereinbefore contained as to the said first mentioned bonds. And from and after the first day of January, which will be in the year one thousand eight hundred and fifty-nine, whenever satisfactory evidence shall have been produced to the Comptroller General that thirty miles of the Spartanburg and Union Railroad are finished and in working order, and that the rest of the said railroad had been graded, bridged, and in all respects made ready for the superstructure, the Comptroller General shall be authorized and required to endorse on other bonds of the said company to an amount not exceeding one hundred and forty thousand dollars the like guarantee of the State, which said last mentioned bonds shall bear interest and be payable in like manner as the bonds first above mentioned, but shall not be subject to the proviso hereinbefore contained as to the said first mentioned bonds.

That the said last mentioned bonds, to be endorsed, as aforesaid, after the first day of January, one thousand eight hundred and fifty-nine, shall not be used by the said company for any other purpose than for procuring the iron rails, chairs, spikes and equipments for the said railroad and for putting down the same; and the said bonds shall not be endorsed unless upon a resolution of the President and Directors of the company, for the time being, pledging the said company that the same shall be used for the purpose of procuring the said iron rails, chairs, spikes and equipments, and for putting down the said rails, and for no other purpose.

That so soon as any of the said bonds hereinbefore mentioned shall have been endorsed, as aforesaid, and as they may thereafter be endorsed, they shall constitute a lien or a mortgage upon the whole of the said railroad, including the roadbed, right of way, grading, bridges, masonry and superstructure upon all the stock subscribed for in said company, and upon the chartered rights and privileges thereof, and upon said iron rails, chairs, spikes and equipments, when purchased and delivered; and the State of South Carolina, upon the endorsement of the said bonds, and by virtue thereof, shall be invested with the said lien or mortgage without any deed from the said company to secure the payment of the said bonds and the interest thereon by the said company as the same shall become due. And the said lien or mortgage, besides the stock, right of way, grading, bridges, masonry, superstructure, iron rails, spikes, chairs, equipments, chartered rights and privileges, shall include all the property owned by the said company as incident to or necessary for its business. And after the Comptroller General shall have endorsed any of the bonds of the said company, as hereinbefore provided for, it shall not be lawful for the said company to give or grant to any person or persons whomsoever, or to any corporation whatsoever, any lien, mortgage or encumbrance of any kind which shall have priority over or come in conflict with the lien of the State hereby secured; and every such lien, mortgage or encumbrance shall be null and void as against the said lien or mortgage of the State; and the said lien or mortgage of the State shall have priority over all other claims existing or to exist against the said company.

That the State expressly reserves the right to enact all such laws as may be deemed necessary to protect the interest of the State, and to secure it against any loss in consequence of the endorsements of bonds under the provisions of this Act, but in such manner as not to impair the just rights of the stockholders of the company.

III. That all said bonds were issued by said company, and that the Comptroller General, satisfactory evidence having been given him that all liens upon the property of the Spartanburg and Union Railroad Company had been removed, and that all the requirements of said Act had been complied with, endorsed upon said bonds the guarantee of the State of South Carolina thereby pledging the faith and funds of said State...