The Peoria v. Thompson

• Citation: 1882 WL 10308,103 Ill. 187
• Parties: THE PEORIA AND SPRINGFIELD RAILROAD COMPANYv.S. H. THOMPSON.
• Decision Date: 30 June 1882
• Court: Supreme Court of Illinois

103 Ill. 187

1882 WL 10308 (Ill.)

THE PEORIA AND SPRINGFIELD RAILROAD COMPANY

v.S. H. THOMPSON.

Supreme Court of Illinois.

Filed at Springfield Mar. 28, 1882.Rehearing denied June Term, 1882.

OPINION TEXT STARTS HERE

APPEAL from the Appellate Court for the Second District;--heard in that court on appeal from the Circuit Court of Peoria county; the Hon. D. MCCULLOCH, Judge, presiding.

The Peoria and Springfield Railroad Company, a corporation duly organized under the laws of this State, on the 31st day of October, 1871, entered into a written contract with B. S. Prettyman, D. T. Thompson, Thos. Edes, A. J. Ware, B. E. Smith, C. R. Griggs and W. Dennison, by which the latter covenanted and agreed to furnish the materials, build and complete in a good, workmanlike manner, a single track railway, with necessary sidings and passing places, from the city of Peoria, in Peoria county, via the city of Pekin, in Tazewell county, to the city of Springfield, in Sangamon county, this State, in consideration of which, among other things, the railroad company agreed to pay the above named contractors the sum of $20,000 per mile in first mortgage seven per cent bonds of the company, which were to be made the first “and exclusive lien on said railroad, its franchises, property and equipments of every kind.” Said bonds, or so many of them as might be required, were to be delivered by the company to the contractors, or their agents, at any time, on demand, to be used by them “to pay for iron, materials or labor for the construction of said road, or to be sold for money,” upon satisfactory evidence being produced that the materials were purchased for the use of the road, or the work and labor were done according to the terms of the contract. The company also agreed to pay the contractors in the paid up capital stock of the company the additional sum of $12,000 per mile for said railway, to be issued whenever required for the construction of the road.

Subsequent to this contract, and before the 13th of February, 1872, by some arrangement between the contracting parties, Edes and Prettyman withdrew from the undertaking, and Smith, Griggs, Dennison, Ware and Thompson, the remaining contractors, assumed the performance of the contract with the railroad company. Upon this change in the parties to the enterprise, it was agreed that the business should thereafter be conducted under the name and style of Thompson, Griggs & Co.; that Ware and Thompson should receive nothing for their services, and that Smith, Griggs and Dennison should furnish the money, and that Smith alone should have exclusive charge of the financial matters of the company. This arrangement seems to have been acquiesced in by appellant, for on the day last mentioned a supplementary agreement was entered into between the railroad company and the members of the firm of Thompson, Griggs & Co., in which the making of the former agreement is recited, and by the terms of which the contractors bound themselves to furnish the necessary material and build a bridge, of a specified character, on the line of the company's road across the Illinois river, for which the company agreed to pay them in said first mortgage bonds, at par value, the additional sum of $200,000.

In pursuance of these contracts, on the 11th of April following, the railroad company, through its board of directors, adopted certain resolutions, wherein it ordered and directed “that a series of one thousand five hundred of the company's bonds, each for the sum of $1000, to be numbered consecutively from one to fifteen hundred, inclusive, be prepared for issue and delivery, signed by the president and secretary, the corporate seal of the company to be affixed thereto, and authenticated, when so signed and sealed, by the certificate of a trustee, bearing date the first day of April, 1872, and payable to I. E. Leonard, or bearer, in the city of New York, at such place therein as such company shall from time to time appoint, on the first day of April, * * * 1902, with interest warrants thereto attached, signed by the secretary, for the payment of interest thereon, at the rate of seven per cent per annum, free from government tax, payable at the same place on the successive days of October and April of each year, both the principal and interest of such bonds to be payable in gold.” It was further ordered and directed in and by said resolutions, that a deed of trust be prepared and executed by the president and secretary of the company conveying the road of the company, its appurtenances, appendages, franchises, equipments, tolls, income, assets and property, then possessed or thereafter acquired, to William A. Dennison, trustee, to secure the payment of said bonds and interest warrants.

The bonds and trust deed were prepared and duly executed in conformity with the directions of the company as expressed in the above resolutions, as of the date of April the 1st, 1872. The bonds, when so executed by the company, were sent to Smith, at Columbus, Ohio, for the purpose of having them certified by Dennison, as in the trust deed provided. Six hundred of these bonds were, on presentation, accordingly certified by Dennison, and left by him with Smith in the latter's office, in Columbus, Ohio, where Dennison and Smith both resided, and where the latter kept his office. The remaining nine hundred bonds were never so certified or used for any purpose.

About the time of the preparation of these bonds and the trust deed, or perhaps a short time before, Thompson, Griggs & Co. commenced active operations in the building and construction of the road and bridge, under the contracts above mentioned, and so continued until in January, 1873, when the work was suspended, and has never since been resumed. Before the abandonment of the work the contractors had already completed the bridge, and substantially finished as much of the road as lies between Peoria and Pekin, a distance of twelve miles. On the 8th of April following the suspension of the work in January, the railroad company leased the completed portion of its road lying between Pekin and Peoria to the Indianapolis, Bloomington and Western Railway Company, for ninety-nine years from the 1st day of February, 1873, with a covenant of renewal forever, at an annual rental of $50,000, a part of which was to be applied by the lessee to the payment of the semi-annual interest on six hundred of the above mentioned bonds, and the balance of the rental to be paid to the railroad company. Upon the execution of this lease a certificate was endorsed upon the six hundred bonds above mentioned, showing the payment of the interest was assumed by the Indianapolis, Bloomington and Western Railway Company. Five hundred and ninety of these bonds being thus executed by the company, certified by the trustee, and the interest assumed by the lessee of the road, in the manner stated, were from time to time negotiated and transferred, in the regular course of business, by Thompson, Griggs & Co., and have passed into the hands of the present holders for value, without notice of any supposed infirmity in them, being the same bonds now in controversy. The remaining ten of the six hundred, after having been used for some time as collateral security, have since been brought into court and surrendered up, and are therefore eliminated from the present controversy.

The trust deed above mentioned expressly provided that in case the company should, for the term of six months, make default in the payment of the interest on its bonds, the principal should also become due and payable at the option of the holders of the bonds. Default having been made in the payment of the interest on a part of these bonds, Samuel H. Thompson, on the 22d of May, 1875, filed in the Peoria county circuit court the original bill in this case, against the railroad company, Dennison, the trustee, and various other parties in interest, alleging that he was owner of five of the bonds in question; that default had been made in payment of the interest thereon for more than six months; that the company had become insolvent; that its property was depreciating, and that it had ceased to apply the earnings of the road to the payment of the interest on its bonded indebtedness, whereby the complainant and other bondholders were in danger of losing their claims, etc., and prayed a foreclosure of the deed of trust, and that a receiver might be appointed to take immediate charge of the road and assets of the company. Upon the filing of this bill, the court, on the same day, appointed James Haines receiver, who thereupon qualified, and entered upon the duties of his appointment.

Dennison, the trustee, on the 2d of January, 1877, filed an answer and also a cross-bill, setting up the making of the bonds and trust deed, as heretofore stated; the leasing of the road to the Indianapolis, Bloomington and Western Railway Company; the insolvency of the latter company; the default in payment of interest on all the bonds; the insolvency of the Peoria and Springfield Railroad Company, and the sale and transfer by it of the six hundred bonds in question about the time of their date, and prayed for a foreclosure of the trust deed.

The company, by its answers to the original bill and cross-bill of Dennison, admits the making of the trust deed and bonds by the company, but denies they were ever negotiated or delivered by it. It at the same time filed a cross-bill, in which the same facts are reiterated. It is also charged in the cross-bill that Thompson, Griggs & Co. entered into a conspiracy to wrongfully and fraudulently appropriate the bonds in controversy to themselves; that they have failed to perform their contract with the company for the building of the road, and procuring the right of way, by reason of which, it is claimed, the company has sustained large damages, which it asks to be recouped or set off against the claims sought to be enforced against the...