The Commissioners of Craven v. The Atl. and North Carolina R.R. Co.

• Decision Date: 30 June 1877
• Citation: 77 N.C. 289
• Court: North Carolina Supreme Court
• Parties: THE COMMISSIONERS OF CRAVEN v. THE ATLANTIC AND NORTH CAROLINA RAILROAD COMPANY and others.

77 N.C. 289

THE COMMISSIONERS OF CRAVEN

v.THE ATLANTIC AND NORTH CAROLINA RAILROAD COMPANY and others.

Supreme Court of North Carolina.

June Term, 1877.

MOTION to dissolve an Injunction, heard at Spring Term, 1877, of CRAVEN Superior Court, before Moore, J.

The demand of the plaintiffs in the original action was, that certain bonds issued by defendant company, some of which are held by the other defendants, John L. Morehead and Julius A. Gray, should be declared void; and that the officers of the company be restrained from paying interest on said bonds. An injunction was accordingly granted which the defendants by this motion seek to dissolve. The case is fully stated by Mr. Justice RODMAN in delivering the opinion of this Court. His Honor allowed the motion and the plaintiffs appealed.

Messrs. Green & Stevenson, W. N. H. Smith and D. G. Fowle, for plaintiffs .

Messrs. Jones & Johnston, J. T. Morehead and Merrimon, Fuller & Ashe, for defendants .

RODMAN, J.

The plaintiffs are stockholders in the Atlantic and North Carolina Railroad Company. On January the 1st, 1868, the company made four hundred bonds of $500 each, with coupons attached for interest at the rate of eight per cent per annum, payable semi-annually. The principal was due and payable on January 1st, 1888. The bonds and coupons were made payable in the City of New York, and recited that they were secured by a mortgage on the Railroad, and were issued by authority of an Act of Assembly passed at the session of 1854-55. Shortly thereafter, before the bonds were issued, the company made a mortgage or deed in trust of all of its property to certain trustees to secure the payment of said bonds. The plaintiffs say that the company delivered to the defendants, Jno. L. Morehead and Julius Gray, bonds of the par value of $100,000 in payment of a debt from the company to them of $76,899.13, and that the company sold the rest of the bonds at the rate of $80 for $100 of the bonds.

The plaintiffs say that said bonds were not authorized by the Act referred to and were void, and that those issued to Morehead and Gray were usurious; that the company has regularly paid to those defendants the specified interest upon the bonds delivered to them up to the date, (not stated, but we suppose up to January 1st, 1877,) and that the excess over the legal interest so paid ought to be credited as a payment on the principal of those bonds They further charge that the company is about to pay a further sum by way of interest on those bonds, and they ask that the company be restrained from such payment and that the bonds be declared void.

Upon this complaint Seymour, J., ordered an injunction as prayed for.

The defendants, Morehead and Gray, filed a joint answer and thereupon moved before Moore, J., at the Spring Term, 1877, of Craven Superior Court, to dissolve the injunction so far as it prohibited payment to them, and the Judge granted their motion and dissolved the injunction. From this judgment the plaintiffs appealed.

The defendants in the answer admit the facts alleged by the plaintiffs, except those touching the acquisition of bonds of the company by them. As to this (in article 2) they say, that Morehead is the owner of twenty-five, and Gray, of thirty-three of the bonds of the company which they purchased before maturity for value and without notice of any defect or irregularity. In the next article they say, that as administrators of John M. Morehead who died in 1866, they recovered one or more judgments against the company for work done by their intestate under a contract with the company in the construction of its road, and upon these judgments they levied execution on the property of the company and were proceeding to sell it, when the company paid to them in New York 188 of its bonds aforesaid, of the par value of $94,000 which they accepted in satisfaction and discharge of said debts. They do not state with precision what was the amount of the indebtedness of the company to them, when the bonds were delivered in discharge of it, nor even when the bonds were delivered. It may be inferred however from what they say, that they took the 188 bonds at or about 80 cents on their face value. Neither is it clear whether or not the 58 bonds which in article 2, they say they bought for value, are a part of the 188 bonds which they received as administrators. It will not prejudice them in the present stage of the case if we assume that they were. If a pleading is ambiguous it must be taken most strongly against the pleader. And if the fact should be otherwise they can amend their answer by stating distinctly when and for what consideration they respectively purchased those 58 bonds.

In the present stage of the case we assume the facts set forth in the answer as true.

The question before us is, whether the injunction as respects the defendants, Morehead and Gray, was rightly dissolved, or should have been continued untill the hearing. Our opinion is confined to that precise question, and does not extend to holders of any of the bonds of the company other than those which were delivered to the defendants, as administrators of John M. Morehead, and in discharge of the indebtedness of the company to him.

1. The bonds are not void by reason of a want of power in the company to issue them. A railroad corporation must have power to contract debts, and every corporation which has that power must also have power to acknowledge its indebtedness under its corporate seal, that is, to make its bonds. It is immaterial whether the company had power to make its bonds by virtue of its general corporate powers, or of the Act of 1854-'55, ch. 232. We think that for a proper purpose it had it under both.

2. The much more serious question is, whether the bonds made to the administrators of John M. Morehead under the circumstances were usurious.

In the absence of special legislation, corporations are embraced in the usury law just as natural persons are, and we...