The Racine & Miss. R.R. Co. v. the Farmers' Loan & Trust Co.

• Decision Date: 30 September 1868
• Citation: The Racine & Miss. R.R. Co. v. the Farmers' Loan & Trust Co., 49 Ill. 331, 1868 WL 5237, 95 Am.Dec. 595 (Ill. 1868)
• Court: Illinois Supreme Court
• Parties: THE RACINE & MISSISSIPPI RAILROAD COMPANYv.THE FARMERS' LOAN & TRUST COMPANY et al.

49 Ill. 331

1868 WL 5237 (Ill.)

95 Am.Dec. 595

THE RACINE & MISSISSIPPI RAILROAD COMPANY

v.THE FARMERS' LOAN & TRUST COMPANY et al.

Supreme Court of Illinois.

September Term, 1868.

OPINION TEXT STARTS HERE

WRIT OF ERROR to the Circuit Court of Stephenson county; the Hon. BENJAMIN R. SHELDON, Judge, presiding.

The facts are fully stated in the opinion of the court. Messrs. KNOWLTON & JAMIESON, for the plaintiffs in error.

Mr. THOMAS J. TURNER, for the defendants in error.

Mr. JUSTICE LAWRENCE delivered the opinion of the Court:

On the 17th of April, 1852, the legislature of the State of Wisconsin passed an act incorporating the Racine, Janesville & Mississippi Railroad Company, with power to construct a railway from Racine, on Lake Michigan, to the Mississippi river. The company was duly organized in November, 1852. By an act of the legislature of Wisconsin, approved June 27, 1853, the company was authorized to build a branch road to Beloit, a town on the line between Wisconsin and Illinois, and by another act, approved July 9th, 1853, the company was authorized to connect its road at Beloit with any railroad then chartered or thereafter to be chartered in the State of Illinois, and to consolidate its stock with the stock of such Illinois road, and place the road under a joint board of directors, to be chosen as the consolidating companies should agree.

The legislature of the State of Illinois, by an act approved February 10th, 1853, incorporated the Rockton & Freeport Railroad Company, with power to build a railroad “from a point on the north line of the county of Winnebago, through the village of Rockton, to Freeport, in Stephenson county.” The company was authorized to consolidate its stock with that of any Wisconsin company that had been or might thereafter be incorporated by the legislature of that State, running from the terminus of said road in the direction of Lake Michigan.

On the 23d of February, 1854, these two companies entered into articles of agreement, the object of which was declared, in the concluding article, to be, “to fully merge and consolidate the capital stock, powers, privileges, immunities and franchises of the Rockton & Freeport Railroad Company, with the Racine, Janesville & Mississippi Railroad Company.”

On the 13th of February, 1855, the legislature of Illinois changed the name of the Rockton & Freeport Railroad Company, to “The Racine & Mississippi Railroad Company,” and on the 31st of March, of the same year, the legislature of Wisconsin changed the name of the Racine, Janesville & Mississippi Railroad Company, to “The Racine & Mississippi Railroad Company.”

We will now state the facts in regard to a third road which ultimately was consolidated with the Racine & Mississippi.

On the 21st of January, 1851, the Savanna Branch Railroad Company was organized under the general railroad law of Illinois, for the purpose of building a road from Savanna, on the Mississippi river, in an easterly direction, to intersect the Galena & Chicago Union Railroad, at a point in Stephenson county, not exceeding 15 miles from the town of Freeport. On the 12th of February, 1851, the legislature passed an act, authorizing the company to build the proposed road, and, for that purpose, to condemn private property, thus recognizing the existence of the corporation. On the 23d of January, 1856, this company entered into articles of agreement with the Racine & Mississippi Railroad Company, by which its stock was consolidated with the latter company, and a majority in interest of the stockholders of the Savanna company, gave their written ratification of the articles. On the 14th of February, 1857, the legislature of Illinois passed an act changing the name of the Savanna Branch Railroad Company, to “The Racine & Mississippi Railroad Company,” and confirming and declaring legal and binding the acts of consolidation entered into between the Rockton & Freeport company, and the Racine, Janesville & Mississippi company, and those between the Savanna Branch company and the Racine & Mississippi Company. Prior to this time, and on the 1st of September, 1855, the Racine & Mississippi Railroad Company had executed and delivered to the Farmers' Loan & Trust Company, a corporation existing in the State of New York, 680 bonds of $1,000 each, payable to said Loan & Trust Company or bearer, and to secure their payment, had executed a mortgage upon so much of their road as was situated in Wisconsin, extending from Racine to Beloit.

Subsequent to the above named act of confirmation, and on the 24th of April, 1857, the Racine & Mississippi Railroad Company executed to the same Farmers' Loan & Trust Company 700 additional bonds of $1,000 each, and on the same day, to secure the payment of said bonds, executed to said Loan & Trust Company a mortgage upon all its road in the State of Illinois, extending from Beloit, on the Wisconsin line, to Savanna, on the Mississippi river. The mortgage recited that the company was engaged in the construction of a railroad from Racine to Beloit, in Wisconsin, and from Beloit to Savanna, in Illinois. These bonds and mortgage bore date June 2d, 1856, but the bonds were not sold, nor the mortgage acknowledged, until April 24th, 1857, after the passage of the confirmatory act. It is to foreclose this mortgage that the present suit is brought.

It should be further stated, the Farmers' Loan & Trust Company, on the 3d of December, 1858, filed their bill in the circuit court of the United States for the district of Wisconsin, against the Racine & Mississippi Railroad Company, to foreclose the mortgage given on that portion of the road situate in Wisconsin, to secure the issue of bonds first above named, and on the 10th day of May, 1859, pending that suit, the railroad company executed to the Loan & Trust company a deed of surrender of the entire road. The road was then fully completed in Wisconsin, and about 20 miles were finished in Illinois. After taking possession, the Loan & Trust company proceeded to complete the road to Freeport, as it was authorized to do by the deed of surrender, and it was opened for business on the 1st of September, 1859, having remained from that time to the present under the undisputed control of the Loan & Trust company. George A. Thomson, a party in this suit, acted as agent of said Trust company, in the management and control of said road.

After the execution of said deed of surrender, and in pursuance of its terms, a decree of foreclosure was pronounced in the then pending suit, giving the railway company five years from the completion of the road to Freeport, in which to redeem said property, and providing that if no redemption should be made, the court should proceed to make such other and further decree in the premises as might be necessary. No redemption having been effected, on the 31st of March, 1865, the Farmers' Loan & Trust Company filed their petition in said court, setting out in full their disbursements and receipts, and praying a decree of sale. An account was stated by the master in chancery, which was approved by the court, and a decree of sale was pronounced, under which George A. Thomson became the purchaser of the Wisconsin division of the road.

In order to comprehend certain questions arising upon the record, it is necessary to state some further facts.

On the 27th of June, 1857, the Racine & Mississippi Railroad Company executed to Morris K. Jesup and Curtis B. Raymond, 700 bonds for $1,000 each, and to secure their payment, also executed a mortgage upon the entire line of road, from Racine to Savanna. This mortgage was made expressly subject to the above named mortgages to the Loan & Trust Company on the Wisconsin and Illinois divisions of the road. On the 26th of December, 1859, Jesup and Raymond filed a bill in the circuit court of Walworth county, in the State of Wisconsin, to foreclose this mortgage, and the Wisconsin portion of the road was subsequently sold, under a decree rendered in said suit, to said Morris K. Jesup, for $270,000. Jesup subsequently conveyed the title thus acquired, to Richard Irvin and George A. Thomson, and Irvin afterwards conveyed to Thomson. On the 2d of December, 1863, Jesup and Raymond filed their bill in the circuit court of the United States, for the northern district of Illinois, to foreclose their mortgage upon that portion of the road situate in Illinois. The court found the sum of $859,362 to be due said Jesup and Raymond, and pronounced a decree of sale, under which the Illinois division of the road was sold and conveyed by the master in chancery to George A. Thomson for $70,000, and the sale was approved by the court.

That portion of the road running from Freeport westward to the Mississippi, was never completed in the name of the Racine & Mississippi Railroad Company, but on the 24th of February, 1859, the legislature of Illinois incorporated the Northern Illinois Railroad Company, with power to build a road from Freeport to the Mississippi. The company was organized in 1860, and George A. Thomson, then managing the Racine & Mississippi road, as agent of the Loan & Trust company, and therefore, under the deed of surrender, occupying a fiduciary relation to the Racine & Mississippi Company, subscribed to all the stock of the Northern Illinois Railroad Company, except $3,800, and became the president. He then proceeded to build the road from Freeport to Savanna, in the name of the Northern Illinois Railroad Company, at no place diverging more than three miles from the track of the Racine & Mississippi Company, and in places occupying its very track, which had been partially graded. This road was built with money obtained from the holders of the bonds of the Racine & Mississippi Company, secured by the mortgages to the Loan & Trust Company.

After the road was completed, it was leased to the Loan & Trust Company, and operated by it, through Thomson as its agent, in connection with the line of the Racine &...