Texas Ry Co v. Marlor

• Decision Date: 19 December 1887
• Citation: 31 L.Ed. 303,123 U.S. 687,8 S.Ct. 311
• Parties: TEXAS & P. RY. CO. v. MARLOR. 1
• Court: U.S. Supreme Court

8 S.Ct. 311

123 U.S. 687

31 L.Ed. 303

TEXAS & P. RY. CO. v. MARLOR.¹

December 19, 1887.

John F. Dillon and W. S. Pierce, Jr., for plaintiff in error.

J. R. Dos Passos, for defendant in error.

BLATCHFORD, J.

This is a writ of error to the circuit court of the United States for the Southern district of New York, brought by the Texas & Pacific Railway Company, a corporation organized and existing under acts of the congress of the United States, to review a judgment entered against it by that cou t on the seventeenth of September, 1884, in favor of Henry S. Marlor, for the sum of $23,204.99. The suit was commenced in a court of the state of New York, in November, 1883, and was removed into the circuit court by the defendant. It was tried by that court, on filing a written waiver of a jury on an agreed statement of facts, and on the depositions of witnesses. The material facts of the case, as found by the circuit court, are as follows: Prior to the first of July, 1883, the plaintiff became the owner of 150 bonds issued by the defendant, and entitled to the interest due thereon on the first days of July in the years 1882 and 1883, according to the terms and conditions of the bonds. Each bond was in the following form:

'No. ___. THE UNITED STATES OF AMERICA. $1,000.

'The Texas & Pacific Railway Company.

'Chartered by act of Congress.

'Seven Per Cent. Income and Land-Grant Bond on the Eastern Division.

'The Texas & Pacific Railway Company hereby acknowledges itself to be indebted to _____, of _____, or assigns, in the sum of one thousand dollars, lawful money of the United States of America; which sum the said company promises to pay the said _____, or assigns, at the office of the company in the city of New York, on the first day of January, A. D. (1915,) one thousand nine hundred and fifteen, with interest thereon at the rate of seven per cent. per annum, payable annually on the first day of July in each year, as provided in the mortgage hereinafter mentioned.

'This bond is one of a series of bonds numbered consecutively from one to eight thousand nine hundred and eight, of the denomination of one thousand dollars each, of like tenor and date, the payment whereof is secured by a first mortgage of even date herewith, duly recorded, upon certain lands heretofore granted to the Texas & Pacific Railway Company, by the state of Texas, or in which said company is in any manner interested, being a first lien or charge upon all those sections or fractional sections or square miles of land acquired or to be acquired by said company in constructing its lines of road east of Fort Worth, under or by virtue of the acts of incorporation of the Southern Pacific Railroad Company, the Southern Transcontinental Railroad Company, the Memphis, El Paso & Pacific Railroad Company, or of the several supplements and enactments relating thereto, or under any of the special or general laws passed by the legislature of the state of Texas, and applicable to said companies, or either of them, or to the Texas & Pacific Railway Company; the total quantity of land to be acquired in constructing said lines of railway under the several grants being estimated at or about 7,600,000 acres. This bond has also, as security for the interest, a mortgage lien upon the net income of the said Texas & Pacific Railway Company, derived from operating its lines of railway east of Fort Worth, in the state of Texas, after providing for the operating expenses, the current repairs and reconstructions, and the interest upon the first and second mortgage bonds secured upon said lines of railway, the length of which, constructed and to be constructed, is estimated to be 524 miles; and in case such net earnings shall not in any one year be sufficient to enable the company to pay seven per cent. interest on the outstanding bonds, then scrip may, at the option of the company, be issued for the interest, such scrip to be received at par and interest, the same as money, in payment for any of the company's lands acquired as aforesaid in Texas, at the ordinary schedule price, or it may be converted into capital stock of the company, when presented in amounts of $100, or its multiple. The holder of this bond is entitled to the benefit of the additional security of the sinking fund provided for in said mortgage, consisting of the net proceeds of the sales of the lands aforesaid, which are to be applied from time to time to the purchase of said bonds at their market value, not exceeding par, or to their redemption, as provided in the mortgage aforesaid. This bond will also be received by the company at par and accrued interest, in payment or exchange for any of its lands covered by the mortgage aforesaid, at the current cash price of the same as fixed from time to time.

'In witness whereof, the said the Texas & Pacific Railway Company has caused these presents to be duly executed, sealed with its corporate seal, and attested by the proper signatures of its president or vice-president and secretary, this fifteenth day of May, A. D. 1875.

'FRANK BOND, Vice-President.

'Attest: C. E. SATTERLEE, Secretary.'

Upon each bond was a certificate signed by the trustees in the mortgage mentioned in the bond, in the following form:

'CERTIFICATE OF TRUSTEES.

'This bond is one of a series of bonds, each for the sum of one thousand dollars, lawful money of the United States of America, bearing seven per cent. interest per annum, payable yearly, said bonds being numbered consecutively from number one to number eight thousand nine hundred and eight. The said bonds are secured by a first mortgage upon all the lands of the Texas & Pacific Railway Company in the state of Texas, granted in aid of the construction of its lines east of Fort Worth, and also upon the net income of said lines of railway, after deducting current expenses, reconstruction, and repairs, and the interest upon the first and second mortgages on said lines of railway; and they are also receivable, the same as money, in payment or exchange for such lands, at the current price of the same as fixed from time to time.

'W. T. WALTERS,

'GEORGE D. KRUMBHAAR,

'Trustees.'

The complaint alleged that the defendant did not exercise the option given to it by the bonds to pay the plaintiff the interest in scrip upon the 150 bonds, which became due and payable on July 1, 1882, or that which became due and payable on July 1, 1883, and demanded judgment for the interest in money, with accrued interest from those days respectively. There was no formal presentment by the plaintiff of the bonds in suit for the payment of interest on July 1, 1882, or on July 1, 1883, or at any other time. Shortly after each of those days the treasurer of the defendant, at the defendant's office, notified the holders of the bonds that it was not prepared to pay interest, as the earnings of the railway were not sufficient; and no action was taken by it in reference to the issue of scrip. Before the commencement of this suit, and induced by the suggestion that suits were about to be brought to recover the interest on the bonds, and on or about October 12, 1883, the executive committee of the defendant's board of directors adopted a resolution providing for the payment of the interest in question in scrip. Notice of this action on the part of the defendant was given to the plaintiff and to the bondholders generally, by publication, before this suit was brought, and the defendant notified the plaintiff of its willingness to deliver to him his scrip for the interest in suit, and tendered it to him at the trial, but he refused to receive it.

On the twenty-ninth of March, 1875, the defendant had outstanding 9.252 land-grant bonds, secured by a first mortgage upon all the lands in the state of Texas which it had acquired, or might thereafter acquire, by virtue of its consolidation with the Southern Pacific Railroad Company and the Southern Transcontinental Railway Company, or by virtue of its consolidation with, or purchase of, any other railroad company in the state of Texas, under the authority of the acts of congress of March 3, 1871, and May 2, 1872; also certain construction bonds, secured by a first mortgage upon its lines of railway and their appurtenances east of Fort Worth in the state of Texas. Those land-grant bonds and construction bonds were fixed obligations, with coupons for semi-annual interest, and the mortgages which secured them contained provisions for fore- closure, in case of default in the payment of such interest. On the twenty-ninth of March, 1875, the road of the defendant was only partially completed to Fort Worth, about 325 miles of it being then built and in operation. The defendant had made default in paying the interest on the bonds above mentioned. On tht day, the stockholders met and passed the following resolution: 'Resolved, that the board of directors shall be, and they are hereby, requested and fully authorized and empowered to provide for and to issue eighty-nine hundred and eight (8,908) income and land-grant bonds, each for the sum of one thousand dollars, bearing seven per cent. interest; the interest and the principal of said bonds to be payable in United States currency, and said bonds to mature in forty years from their date, and to secure the payment of the interest and the principal of said bonds by a first mortgage upon all the lands heretofore granted to this company, or in which this company in said state is in any manner interested, being a first lien or charge upon all those sections or parts of sections or square miles of land acquired by the Texas & Pacific Railroad Company, or to be acquired by said company in constructing its lines of road east of Fort Worth, under or by virtue of the acts of incorporation of the Southern Pacific Railroad Company, the Southern Transcontinental Railway Company, the Memphis, El Paso & Pacific Railroad Company, or of the several supplements and amendments relating...